the 7 habits of highly effective s&op - atim.nl · 1. tribute to dr. steven r. covey (who...

Webinar July 21, 2011

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The 7 Habits of Highly Effective S&OP

Dr. Mark Moon

Associate Professor of Marketing

Head, Department of Marketing & Logistics

Director, Forecasting and Demand Management Forum

University of Tennessee, Knoxville


Today’s Agenda

1. Tribute to Dr. Steven R. Covey (who developed the “7 Habits”) (So I don’t get sued)

2. Our vision of the ideal state of S&OP

3. The 7 Habits of Highly Effective S&OP

1. Be Proactive

2. Begin with the End in Mind

3. Put First Things First

4. Think Win/Win

5. Seek First To Understand, Then to Be Understood

6. Synergize

7. Sharpen the Saw

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“The 7 Habits of Highly Effective People” First published in 1989

Regarded as one of the most impactful self-help books ever written. 15 million copies sold,

translated in 38 languages

“7 Habits” framework has been adapted to different contexts:

Happy kids

Effective families

Effective leaders

Can it be a useful framework for S&OP Implementation?

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Before We Get Into the 7 Habits …

It might be a good idea to articulate our vision of S&OP (Sales and Operations Planning)

Which we like to think of as Demand/Supply Integration

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Demand/Supply Integration (otherwise known as S&OP)

What is it? The process by which a company makes

strategic decisions based upon market demand, supply capabilities, financial objectives, and the strategic direction of the firm

Why do companies do it? So that marketing will create demand for products

that can be produced So that operations will supply products for which

there is demand

Bottom line – so all sides of a company will be singing out of the same hymnal


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Demand/Supply Integration (DSI): The Ideal State

Demand/Supply Integration

(S&OP)

SUPPLY Production,

Logistics, etc., and Upstream Suppliers

DEMAND Sales and

Marketing, Downstream

Channel Partners

Finance

Capacity Forecast (Including inventory)

Demand Forecast

Financial Goal

Operational Plan

(supply and inventory)

Demand Plan

Financial Plan

Senior Leadership

Strategic Direction

Alignment To

Strategy


So Now Let’s Look At The 7 Habits

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Habit # 1 – Be Proactive

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“Your life doesn't just "happen." Whether you know it or not, it is carefully designed by you. The choices, after all, are yours. Just remember that every moment, every situation, provides a new choice. And in doing so, it gives you a perfect opportunity to do things differently to produce more positive results.”


Be Proactive

Demand/Supply Integration doesn’t “just happen.”

Many organizations have ingrained cultures that promote siloed thinking.

Moving an organization toward a DSI orientation requires proactive planning and execution.

Studies have shown that DSI success is determined by:

Culture change requires proactive change management to overcome cultural barriers.

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Process = 40% Tools = 10% Culture = 50%


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The Levers of Change Management

Process = 40% Tools = 10% Culture = 50%

Information

and Systems Clean data and

common IT platforms

Culture & Values Everybody committed to success through

openness and honesty

Metrics & Competencies

Doing the right things and measuring results

in the right way

Business Processes One, standardised set

of processes, understood across the business

Organization The right structure with

people who have

the right responsibilities

and accountabilities


Habit # 2 – Begin with the End in Mind

“Habit 2 is based on imagination--the ability to envision in your mind what you cannot at present see with your eyes. It is based on the principle that all things are created twice. There is a mental (first) creation, and a physical (second) creation. The physical creation follows the mental, just as a building follows a blueprint. If you don't make a conscious effort to visualize who you are and what you want in life, then you empower other people and circumstances to shape you and your life by default.”

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Begin With The End in Mind

Successful S&OP (or DSI) implementations require a vision of what the process is trying to achieve

This vision must be clearly articulated and endorsed by senior leadership

This is a strategy for planning the business, not just for planning the supply chain.

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An Example of One Company’s Vision

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4

SIOP

Reconciliation

(Wk3)

4

SIOP

Reconciliation

(Wk3)

2

Demand & Inventory

Review

(Wk2)

2

Demand & Inventory

Review

(Wk2)

3

Supply Review

(Wk3)

3

Supply Review

(Wk3)

5 Executive

SIOP Meeting (Wk4)

5 Executive

SIOP Meeting (Wk4)

1

Portfolio

& Product Review

(Wk1)

1

Portfolio

& Product Review

(Wk1) Integrated

reconciliation

& financial

appraisal

4

SIOP

Reconciliation

(Wk3)

4

DS

I Reconciliation

(Wk3)

2

Demand & Inventory

Review

(Wk2)

2

Demand & Inventory

Review

(Wk2)

3

Supply Review

(Wk3)

3

Supply Review

(Wk3)

5 Executive

SIOP Meeting (Wk4)

5 Executive

DSI Meeting (Wk4)

1

Portfolio

& Product Review

(Wk1)

1

Portfolio

& Product Review

(Wk1) Integrated

reconciliation

& financial

appraisal

A continuous cycle of events


Habit # 3 – Put First Things First

“Habit 3 is about life management as well--your purpose, values, roles, and priorities. What are "first things?" First things are those things you, personally, find of most worth. If you put first things first, you are organizing and managing time and events according to the personal priorities you established in Habit 2.”

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Put First Things First

Urgent Not Urgent

Important

Not Important

Quadrant 1

Quadrant 3

Quadrant 2

Quadrant 4


The Challenge …

Eliminate Quadrants 3 and 4

Minimize time spent in Quadrant 1 by investing in Quadrant 2

The key:

Don’t prioritize what’s on your schedule

Rather, schedule your priorities

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As an Example -- Demand Planning Process Flow at one company

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Sales History

Forecast

performance

Review /

Change

forecast

Model

Statistical

Forecast

Customer Forecasts

Market/ Product

risks opportunities and

assumptions

Input Data

Consolidation

Demand

Planner

Initial forecast

Validation of

plan,

assumptions

and changes

Gap analysis &

Demand Review

Prep

Demand Review

Approved Demand Plan

&

Action Plan

Business Leader Accountability

Day -6 Day -5 Day -2 Day 0

Comparison with AOP & STRAP

Important Tasks Are Identified, Priorities are Scheduled, and Everyone’s Responsibility and

Timeline is Clear

Sales / Marketing input by

exception, with

risks opportunities and

assumptions


Habit #4 – Think Win/Win

“Win-win sees life as a cooperative arena, not a competitive one. Win-win is a frame of mind and heart that constantly seeks mutual benefit in all human interactions. Win-win means agreements or solutions are mutually beneficial and satisfying. A person or organization that approaches conflicts with a win-win attitude possesses three vital character traits: Integrity: sticking with your true feelings, values, and

commitments

Maturity: expressing your ideas and feelings with courage and consideration for the ideas and feelings of others

Abundance Mentality: believing there is plenty for everyone”

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Think Win-Win

Many times, Demand Planning processes break down because there is a lack of trust between developers and users of forecasts

Are any of these situations true in your companies?

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Think Win-Win

• Does manufacturing complain that sales overstates demand forecasts, doesn’t sell the product and then supply chain gets blamed for too much inventory?

• Does the sales team complain that manufacturing can’t deliver on its production commitments and it’s hurting sales?

• Does manufacturing complain that the sales team doesn’t let them know when new product introductions should be scheduled, and then they complain about missed customer commitments?

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If those sound familiar to you …

Then you might have the Demand and Supply sides of the organization following different agendas.

Your incentive systems might be discouraging a Win-Win atmosphere!

Remember that People Do That For Which They Are Rewarded!

Remember that Culture drives 50% of success!

Eliminating siloed thinking is a cultural challenge

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Habit #5 – Seek First To Understand, Then To Be Understood

“If you're like most people, you probably seek first to be understood; you want to get your point across. And in doing so, you may ignore the other person completely, pretend that you're listening, selectively hear only certain parts of the conversation or attentively focus on only the words being said, but miss the meaning entirely.”

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Seek First To Understand, Then To Be Understood

The essence of DSI, or S&OP, is to provide a forum where the primary business functions can articulate their opportunities and constraints, and then make forward-looking plans that benefit the organization as a whole.

This requires understanding, and openness, of the realities that each function faces.

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An Example from One Company of How this Reconciliation Can Take Place

DSI Reconciliation Meeting Chaired by CFO Attendees:

Lines of Business Leaders Integrated Supply Chain Leaders Others appropriate to issues under discussion

Agenda: Latest financial view Review unresolved issues arising from Demand review & Supply

review meetings Issues arising through this cycle & proposed resolution Agree issues to be raised at Exec-DSI meeting

Output: Financial Plan Issues to be taken to the Exec-DSI meeting

Risks & Opportunities documented Solution Scenarios, including new commercial/supply initiatives Recommendations


The Important Take-Away Here …

The DSI Process provides a forum for different functions to come together and make decisions that benefit the organization as a whole.

This process will not work if turf protection is the order of the day!

This process will work if participants seek first to understand, then to be understood.

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Habit #6 – Synergize

“So put it simply, synergy means "two heads are better than one." Synergize is the habit of creative cooperation. It is teamwork, open-mindedness, and the adventure of finding new solutions to old problems. But it doesn't just happen on its own. It's a process, and through that process, people bring all their personal experience and expertise to the table. Together, they can produce far better results that they could individually.”

“Valuing differences is what really drives synergy.”

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Synergize

For an effective DSI process, all the supporting processes have to be working

Each function brings critical insights to the process, and when each function values the insights of the others, the whole is greater than the sum of the parts.

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Sales Management

Demand Management

Portfolio Management

Resource Management

Project Management Market Management

Supplier Management

Supply Chain Management

Logistics

Procurement


Habit #7 – Sharpen The Saw

“Sharpen the Saw means preserving and enhancing the greatest asset you have--you. It means having a balanced program for self-renewal.”

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Sharpen the Saw

In this context, renewal means continuous enhancement of attitude, knowledge and skills through education and training on various elements of S&OP or Demand/Supply Integration

Everyone involved in an S&OP process, from Demand Planners, to Sales, to Product Managers, to Supply Chain people, to Senior Executives, needs education on the goals, strategies, and tactics of the S&OP process.

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LevelLevel

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Level 3Level 3

Level 2 Level 2 -- PractitionersPractitioners

Level 1 Level 1 -- Foundation LevelFoundation Level

LevelLevel

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Level 3Level 3

Level 2 Level 2 -- PractitionersPractitioners

Level 1 Level 1 -- Foundation LevelFoundation Level

Supply PlanningSupply PlanningDemand PlanningDemand Planning

An Example of How One Company has Invested in “Sharpening the Saw”


In Summary …

Dr. Covey and his “7 Habits” have helped millions of people move from dependence, to independence, to interdependence.

There is wisdom there that can help you to think clearly about your S&OP or DSI processes, and to achieve the goals of Integrated Business Planning

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Our Next Webinar…

Improving Your Forecasting Process by Focusing on What Matters Most

October 20, 2011 1:30 p.m. EDT

Presented by James Berry, Forecast Pro Senior Consultant

Visit www.forecastpro.com to sign up!

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http://www.forecastpro.com/


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Final Questions or Comments?

the 7 habits of highly effective s&op - atim.nl · 1. tribute to dr. steven r. covey (who...

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