About Tom Wallace ____________ WORDS FROM WALLACE – JULY 2008 In this newsletter:  S&OP – IT’S NOT JUST FOR MANUFACTURING ANYMORE IBF - EXECUTIVE BUSINESS FORECASTING & PLANNING FORUM BULLETS FROM BOB - HOW TO OVERCOME THE PERCEPTIONS OF PRECISION GET TO KNOW OUR TEAM MEMBERS - MEET BILL KERBER  S&OP - IT'S NOT JUST FOR MANUFACTURING ANYMORE Sales & Operations Planning was invented in a manufacturing company and has experienced virtually all of its successes in that sector. But, perhaps not surprisingly, more and more non-manufacturers are getting onto the Executive S&OP bandwagon. Let’s take a look. DESIGNER-DISTRIBUTORS.  This is our term for companies that design the product, market the product, distribute the product – but don’t produce it. They leave that up to contract manufacturers. There are many of these companies out there, and their ranks are getting bigger all the time.  A few years ago, I spent some time at Microsoft. They’re a Designer-Distributor for products such as packaged software, X-Box, keyboards, and so forth. Why was I there? To help them with Executive S&OP. Will that process work in a non-manufacturer? Absolutely; S&OP doesn’t care who owns the factory. And, in fact, companies outsourcing all their manufacturing may need it more than others; they often have less control over their sources.

BANKS. A major Australian bank has had great success with Sales & Operations Planning in its consumer loan department. Demand for loans is highly variable, based on interest rates, consumer confidence levels, season of the year, and so forth. The main supply constraint is qualified, trained people to process the loan applications. They can’t be acquired overnight, so that when demand for loans rises sharply it exceeds the supply of people to process them. The result: the backlog of unprocessed loans builds, causing longer waits for applicants to get their loans approved, and frequently causing those applicants to take their business elsewhere. Their S&OP process helps them anticipate demand shifts early and thus make necessary supply changes in time to match the new demand. One of the many important things done by Executive S&OP is the balancing of demand and supply – and this process has application wherever there are issues of demand/supply imbalance. More information on this is contained in Bob’s and my recent book: Sales & Operations Planning: The How-To Handbook, 3rd Edition. RETAILERS. A few years ago I spoke at a conference sponsored by the Institute of Business Forecasting & Planning. On the day before I spoke, a panel discussion on Sales & Operations Planning included a gentleman from Radio Shack. He made some compelling points about why retailers need S&OP, one being that so many of their products come from half a world away and thus carry longer and more variable lead times. Executive S&OP provides a “window into the future” – indispensable in dealing with long lead times and uncertainties. PROCESS DESIGN GROUPS.  We’re seeing companies implement Sales & Operations Planning in centralized organizations that service perhaps a number of operating businesses. One example concerns a centralized plant and process design group's services in a very large company. The demand for the group comes from the business units and it can be quite variable, depending on new product launches, expansion, contraction, acquisitions, and so forth. The critical supply resources are people, mostly engineers and project management people – and they’re not easy to obtain and train quickly. For more info on this, click here.  ANYTHING FOR YOU IN THIS?  I think this last example might be helpful to some of you in manufacturing companies. Think about it for a moment: do you have a central support group in your organization that frequently gets surprised by large upticks in demand and then can’t meet that demand on a timely basis? Does it chronically run late? Are its internal customers dissatisfied? If so, it may be a candidate for Sales & Operations Planning. Thanks for listening, Tom IBF - Executive Business Forecasting & Planning Forum Learn how to implement an Executive S&OP process, and gain support and involvement of senior management FORUM TOPIC II: Executive S&OP: Top Management's Handle on the Business Moderator: Tom Wallace Panelists:  Therese Bassett, VP, Avnet                     Jay Jackson, Executive VP, Stuller                     Mike Lee, VP, Levi Strauss                     Joe Shedlawski, Principal - Commercial Operations, Wyeth A company's success is measured by its financial performance as well as by its track record in satisfying customer and market needs. Successfully implementing an Executive Sales and Operating Planning (S&OP) process does both: it helps companies succeed in the marketplace, as well as achieve their financial goals. The key to the success of an Executive S&OP process is how Supply, Demand, and Strategic goals are aligned. If there is an imbalance, how can it be corrected? In this panel discussion, you will learn the key elements of successful Executive S&OP, the problems you are likely to encounter in implementing the process, and how to overcome those problems. The experience of senior management from different companies who have successfully implemented Executive S&OP will be shared. VIEW ALL UPCOMING EVENTS

About Bob Stahl  _________________   BULLETS FROM BOB HOW TO OVERCOME THE PERCEPTIONS OF PRECISION In our last column, we promised to talk about how to overcome the perceptions of precision associated with forecasting at a very detailed level. We recommended forecasting at a family or sub-family level (except for close-in, where SKU detail is often needed to buy and make the right items). There are two things that contribute to accomplishing this goal of forecasting at a higher level: First is developing the mechanics and simplifying assumptions to convert a family forecast into resource requirements and revenue projections. For more, click here to see Chapter 14 of Sales & Operations Planning: The How-To Handbook, 3rd Edition. The second element is dealing with the organizational behavioral issues surrounding what can be a dramatic change from past practice. This second element is far more difficult. For this reason, we recommend an approach that is rooted in taking a low risk path to gaining experience and confidence, one that proves this approach is a simpler and better way to forecast the future. We sometimes call this the pilot/parallel approach. It has the following characteristics: It totally parallels what’s being done today, thereby eliminating all risk It is a small slice of the business so the development work is not overwhelming. As a result: It takes 90 days or less to complete It enables top management to participate, signaling their willingness to change Learning that ‘less is more’ with regard to forecasting cannot happen without effectively dealing with the counter-experiential and counter-intuitive nature of the change. This approach will demonstrate and lead an organization to learn, in a low risk environment, that it’s far better to be roughly right than precisely wrong.

GET TO KNOW OUR TEAM MEMBERS BILL KERBER  Bill specializes in Executive Sales and Operations Planning and Lean Manufacturing. In his more than thirty years of industry and consulting experience, he has worked with the following companies, among others: AT&T Hamilton Sundstrand Raychem Avery Dennison Murray Sunnen Black & Decker Philips Electronics Viking Pump Engineered Mat'l Solutions Price-Pfister and others He has been a key member of many projects which have delivered significant operating results, such as improving inventory turns from four per year to 45 per year in an entire product line, improving customer service by 10 percentage points while simultaneously reducing inventory, and reducing lead time through several value streams by over 50 percent. Bill is currently a faculty member at the Lean Enterprise Institute, the worlds leading educational organization focusing on Lean Manufacturing. Bill has spoken to numerous professional and technical groups, including APICS International Conferences, the QAD User Conference, the Bull Users Society, the Computer Associates Applications Conference, and many chapter meetings.   Bill received his Bachelor of Science degree in Biology from Lafayette College in Easton, Pa., and received his APICS Fellow level certification in 1991. Bill and Bob Stahl are currently at work on a book about managing demand variation in value streams. The goal is to extend the Lean concepts created at Toyota into a broader spectrum of the manufacturing world while bringing into focus one of the primary concepts of the Toyota Production System:  Level production, or linearity. Bill can be reached at: Bill@HighMixLean.com  - 856-220-7257

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