Hilton Garden Inn Waltham, Mass. March 23, 2011

1. TOPGRADING SOLUTIONS MRI NETWORK S&OP - Myths, Misunderstandings & Misinformation Hilton Garden Inn Waltham, Mass. March 23, 2011 Bob Stahl 508-226-0477 www.RAStahlCompany.com www.tfwallace.com

2. With apologies to Charles Dickens . . . Worst of Times . . .These are perhaps the worst economic conditions in a generation or two . . . and it may get worse before it gets better. (What’s 9%??) Best of Times . . .For those who choose to use them, we have terrific tools in our hands today to deal with the massive uncertainty! Myths, Misunderstandings and Misinformation Sources: Congressional Budget Office; Department of Labor, Bureau of Labor Statistics; Department of Commerce, Bureau of Economic Analysis.

3. Gravitational Force Needed . . . Customers Desired Force = Centripetal Natural Force = Centrifugal Executive S&OP Owners Employees (Suppliers, Community, Country, Planet)

4. Muting Trade-Offs . . . • When a company is trading off one constituency against another, it’s on a slippery slope • Being able to serve all constituencies has a lot to do with timing: • In the short term, the customer is king • Proper prior planning is necessary to serve all constituencies well (Doesn't’t happen by accident) • Executive S&OP is the tool to set conditions for success with regard to Supply Chain performance

5. S&OP Morphing Terminology(causing confusion) • At first -- S&OP meant an executive led process for balancing demand & supply at the volume level • Then -- S&OP meant any process that dealt with balancing demand & supply at both the volume & mix levels, blurring the distinction • Today -- S&OP is no longer exclusively a term that describes any specific process, but rather a set of words that mean anything you want it to mean

6. Volume Supply Demand Balance Mix The Four Fundamentals • How Much? • Rates • The Big Picture • Families • Strategy/Policy/Risk • Monthly / 18 - 36 Mos • Executive Resp. ProActive Behavior • Which Ones? • Timing/Sequence • The Details • Products/SKU’s/Orders • Tactics/Execution • Weekly/Daily 1-3 Mos • Middle Mgt. Resp. ReActive Behavior Very different, separate, & distinct practices but integrated!

7. Master Scheduling Demand Pull Sales & Operations Planning Executive S&OP Volume Supply Planning DemandPlanning Demand Supply Mix

8. Myth #1:“S&OP’s a supply chain thing” Reality: Executive S&OP is a Supply Chain thing. and a Sales & Marketing thing and a Finance thing and a Manufacturing thing and a Procurement thing and an Outsourcing thing and a New Product thing and a General Management thing Sept 2007 -- HBR -- “Are You the Weakest Link in Your Company’s Supply Chain?” It is a company-wide, collaborative decision-making process, reaching up to the top levels in the business.

9. Process Driven versus Personality Driven President/General Manager Sales & Marketing Operations Product Design Finance Logistics & Warehouse Executive S&OP Managing the White Space

10. SoftBenefits“The Predicator” Enhanced Teamwork Improved Communications - Defined & Disciplined Better Decisions with Less Effort and Time Better $$$ Plans with Less Effort and Time Tighter Linkage with Strategy Greater Accountability Greater Control Update to the Annual Business Plan Window into the Future Master of own destiny Top Management’s Handle on the Business Align Human Energy and the Power is Boundless

11. Myth #2: “S&OP’s all about balancing demand and supply” Reality: S&OP does help to balance demand and supply and integrates financial and operational planning and links strategic planning to ongoing operations and shortens the annual planning process and enhances risk management and can impact strategic plans

12. “Strategic Planning . . . forward in reverse” Annual Business Plan Doing The Right Things Strategy Executive S&OP Robert Hayes HBR-Nov/Dec 1985 Strategic Planning - forward in reverse Executive S&OP Tactics Doing The Things Right Master Schedule Execution

13. Myth #3: “S&OP takes too much of Top Management’s time” Reality: Monthly Time Requirement for the Leader of the Business ~ 1.5 hours* * Executive staff time could be more than this.

14. The Executive S&OP Process Step #5 Executive Meeting Heavy Lifting Decisions & Game Plan Step #4 Pre-S&OP Meeting Conflict Resolution, Recommendations & Agenda for Exec. Mtg. Step #3 Supply Planning Capacity constraints 2nd-pass spreadsheets Step #2 Demand Planning Management Forecast 1st-pass spreadsheets Sales Actuals, Statistical Forecasts & Production Actuals Financial Involvement New Product Involvement Creates a Disciplined Rhythm Step #1 Month End Data End of Month

15. Myth #3A: “S&OP is too much detail for Top Management to be involved” Reality: That’s a misunderstanding of what Executive S&OP should be. If you’re trying to set policy & strategywhile living in the “suicide quadrant,” you’ll not succeed.“

16. Executive S&OP II Aggregate Only Quadrant Planning Perspective Full Granular Detail PTF III Building to Customer Demand I Suicide Quadrant Detail Horizon

17. Problems Perspective Mix ProblemsScream for Attention Volume ProblemsBarely Whisper Creates the illusion that allproblems are MIX problems -- therefore need a forecast for full granular detailfor full horizon.

18. Myth #4: “We’ll Never Get S&OP to Work; We Don’t Have Enough Teamwork” Reality: Teamwork is not a Prerequisite. It’s a Result!

19. Soft Benefits Enhanced Teamwork Improved Communications - Institutionalized Better Decisions with Less Effort and Time Better $$$ Plans with Less Effort and Time Tighter Linkage with Strategy Greater Accountability Greater Control Window into the Future

20. Myth #4: Continued Q. What if you’ve implemented Executive S&OP but teamwork hasn’t improved? A. You flat didn’t do it right Gaining teamwork must be one of the objectives of implementing Executive S&OP from the get-go. Harbinger = Teamwork startsin and within the Design Team.

21. Myth #5: “S&OP Is Too Rigid; Our Business Changes Too Rapidly For S&OP” Reality: Executive S&OP is all about change. It’s a coordination tool

22. Tools & Techniques Reduce Waste & Time Enhance Coordination Increase Reliability Six Sigma, Total Quality, Poka-Yoke, ISO + others X X X Sales & Operations Planning, ERP, Kanban, VMI, + others Lean Mfg., Just-In-Time, Quick Changeover (SMED), Flow + others

23. Complexity, Change and Coordination Complexity and the Rate of Change Need for Effective Coordination Processes Executive S&OP is the Primary Coordination Process

24. Coordination is all about:Alignment of Human Energy Accomplishment Accomplishment

25. Myth # 6: “We Can’t Use S&OP Because We’re Totally Outsourced” Reality: Executive S&OP Doesn’t Care Who Owns The Factory. . . . nor do Customers care who owns the resources of production! “Outsourcing” is a vital contributor! Heavily Outsourced Companies May NeedExecutive S&OP More Than Others.(i.e., Just Bats)

26. Myth #7: “Our Company Is Too Big (Too Small) for S&OP” Reality: Executive S&OP operates . . . independently of company size Procter & Gamble ~ $ 80 Billion Microsoft ~ $ 60 Billion Dow Chemical ~ $ 55 Billion Homac ~ $ 00.0040 Billion Just Bats ~ $ 00.0030 Billion

27. Myth #8: “Our Forecasts Are Not Accurate Enough For S&OP” Reality: Executive S&OP Does Not Require “Accurate” Forecasts But by working on the process,itoften helps to improve the forecasts

28. Forecasting Current Customers New Customers Competition Economic Outlook Market Trends New Products Pricing Strategy Promotions Bid Activity Management Directives Intra-Company Demand History (Data) Other Inputs -- Process -- Output Forecasts that are: 1. Reasoned 2. Reasonable 3. Credible 4. Transparent 5. Reviewed Frequently Process

29. Forecasting . . .A Three-Legged Stool Market View Customer View Historical View Reconciliation Process (The “DAM”Meeting) Consensus Forecast Compare to Annual Business Plan Applying “Puts & Takes” (Actions) Company Forecast

30. Myth #9: “S&OP Is Simple; All You Need Is A Few Spreadsheets” Reality: The logic of Executive S&OP is SIMPLE Implementing Executive S&OP Is All About Change Management . . . And that is not simple!

31. Research finding . . . Lora Ceceri, Altimeter -- Boston, September 2010 The effective use of S&OP is: • 60% Change management • 30% Process improvement • 10% Technology

32. Myth #10: “We Can’t Do S&OP. THEY Will Never Participate” • Reality: • Never Say Never • People Can and Do Change – • But . . . It doesn’t happen by accident!

33. Myth #10: Continued • Who Are THEY? • Top Management? • Sales/Marketing • Manufacturing? • Finance? • New Product Development? • Outsourcing? • All of the above?

34. Myth #10: Continued • Why not? Are they bad people? • They don’t understand it. • They don’t understand it, because they haven’t been taught. • It’s “counter-experiential.” • That’s why education and “buy-in” from the get-go is important! • It’s all about changing mind-sets!

35. Executive S&OP is . . .APICS Dictionary, 13th Edition, October 2010 • The executive portion of the overall sales and operations planning set of processes. • It is a decision-making activity involving the leader of the business (president, general manager, COO, managing director), his or her staff, and a number of middle managers and specialists. • Its mission is to • balance demand and supply at the aggregate level, • align operational planning with financial planning, • link strategic planning with day-to-day sales and operational activities. • It is a multi-step process involving demand planning, supply planning, and middle and top management meetings for decision-making and authorization.

36. With apologies to Charles Dickens . . . Worst of Times . . .These are perhaps the worst economic conditions in a generation or two . . . and it may get worse. Best of Times . . .For those who choose to use them, we have terrific tools in our hands today to deal with the massive uncertainty! Myths, Misunderstandings and Misinformation

37. Done Properly . . . • Implementation approach fits these times: • Low Cost • No capital investment; no software; just time • Low Risk • Parallel Pilot Approach • Quick Results • 90-Days for Complete Pilot Demo • High Impact • Aligns Human Energy Simpler (Not Easier) Better (in 90 Days!!!) • “Ultimate Sophistication • Is Simplicity” • Oliver Wight

38. The Books . . .

39. In the Making . . . Planned Publication: 3rd Quarter 2011

40. Making Change “In human affairs, the willed future always prevails over the logical future.” The only time that the “logical future” has a chance is if we deny its possibility. “Change happens one step at a time, by thinking globally, but acting locally.” Rene Dubos -1982 A Celebration of Life An essay

41. Thanks for Listening Bob Stahl 508-226-0477 RStahlSr@aol.com www.RAStahlCompany.com www.tfwallace.com