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View this article as a PDF here. "This article was originally published Nov. 1 2013." President's Note In this article, I will address some of the issues related to managing intelligent demand in S&OP. Actually, the first issue is defining what intelligent demand is. If you are supplying components to support your customer's manufacturing schedule, this article applies to you. Classic examples are companies supplying automotive assembly plants, white goods assembly plants or any other customer that provides a schedule instead of specific purchase orders. Managing intelligent demand in S&OP requires some special considerations. What are bookings and backlog in an environment where there are no customer orders and only schedules? In this article, I write about an approach to managing this type of demand in the standard S&OP process. In most cases, S&OP families will have multiple demand streams, each with different characteristics. We need to be able to combine the intelligent demand streams in order to get to "The Story" for the family. What is intelligent demand? We have coined the term "intelligent demand" to represent the case where the customer provides us with a rolling schedule rather than individual purchase orders. Why call it intelligent demand? Instead of forecasting or guessing at the demand, as a supplier we have intelligence about our customers' requirements. Their vendor schedule is directly linked to our shipping plan and, theoretically, we don't need to forecast demand. The automotive industry pioneered this approach back in the 1980s.They built EDI linkages between the assembly plants and their tier one suppliers. The plant's vendor schedule became the tier one supplier's demand plan. This approach was a game changer for the industry and has since become a common approach to building the link between two manufacturing plants where one supplies the other. The customer does not place orders in the intelligent demand environment - they transmit schedules. These schedules will be updated and retransmitted daily or sometimes weekly. Unfortunately, the retransmitted schedule may be significantly different than the previous schedule, leaving the planner at the supplying site to question the validity of the term "intelligent demand". Intelligent demand is dependent demand - demand that is directly related to the demand for parent products (check the APICS dictionary for a full definition of dependent demand). This case is slightly different, as the demand is not driven through the bill of material but through a plant-to-plant schedule link. In following diagram, the finished product, "RY1OO", uses a Wheel Bogey, 2000. The RY1OO is made at an assembly plant and the Wheel Bogey assembly is supplied by a vendor. Supply Chain Bill of Material for RY1OO - Part number 2000, Wheel Bogey is made by the supplier The following diagram shows how the planning system in the assembly plant uses the master schedule and the bill of material for RY1OO to calculate the dependent demand for the 2000 Wheel Bogey. They then convert this demand into a vendor schedule that is transmitted to the supplying plant. The supplying plant then uses this customer schedule to develop their master schedule for the Wheel Bogey and calculates the requirements for its component. Plant-to-Plant Linkage with Intelligent Demand At first glance, the demand for the Wheel Bogey in the supplying plant looks like independent demand. It came from the customer and was not generated through the supplying plant's schedules and bills of material. However, if we look at the total supply chain, the demand for the Wheel Bogey in the supplying plant is directly linked to its schedule in the assembly plant. In fact, there is a "Supply Chain Bill" or a "Bill of Plants" that is creating this link. If this link is working properly, the demand for the Wheel Bogey in the supplying plant is dependent on the master schedule in the assembly or customer plant. We are using the term intelligent demand to refer to this special type of dependent demand driven by the schedule link between the two plants. Now, put it into S&OP! At DBM, we break the Sales and Operations Plan into five sections: Bookings, Shipments, Backlog (Open Customer Orders), Supply(Production) and Inventory. We have found this presentation works in multiple business models, including build-to-stock, build backlog? Customers may provide a d projects. Using this standard format has facilitated combining multiple business models in a single S&OP process. However, the intelligent demand model provides some unique challenges, especially for the booking and backlog sections of the plan. Using this definition, the backlog for this demand stream is the shipping plan over this schedule zone. In the example, we see a backlog of 120 units in Month 1,120 units in Month 2 and 110 units in Month 3. The total backlog is 350 units. backlog. To address these issues, we have to establish a specific schedule zone that we will treat as backlog. This is a 'gutfeel' exercise. In the following example, the customer is providing a shipping plan for 12 months but we are only treating three months of this as actual backlog. We know that they may change the plan inside this zone but we are also confident that we must plan to meet this demand. There are a number of factors that go into setting this zone such as our specific customer contract, the supply chain lead-time, the demonstrated stability of the schedule, etc. In the end, the actual length of this zone is not as important as setting it. The difference between two months and three months will not dramatically change the results. I have defined the last period of this zone as EOB - end of backlog. Using this definition, the backlog for this demand stream is the shipping plan over this schedule zone. In the example, we see a backlog of 120 units in Month 1,120 units in Month 2 and 110 units in Month 3. The total backlog is 350units. With a shipment plan and an opening backlog, we can back into the bookings. The actual bookings for Month 0, the month just completed, are calculated as follows: Actual Bookings= A-8 A = The sum of the Current Shipment Plan for M0 to EOB and B = The sum of the Last Shipment Plan from M0 to (EOB-1) Let's put this in layman terms. A is the sum of last month's shipments an d the new shipment plan out to the end of the backlog (EOB) and B is last shipment plan from the beginning of last month to one period prior to the end of the backlog, actually the end of the backlog, as it would have been in the last plan. Basically, the actual bookings equal the shipments, plus or minus any changes in the backlog zone, plus the shipment plan for the new month added to the backlog. So what? Why do we care about a booking and backlog plan in this case? Why go through all the trouble? Tracking bookings gives us an early warning of changes in the demand stream. In the example, we see the Month 2 bookings dropping off to 80 units, foreshadowing the Month 5 shipment plan. You could get to the same story by looking at the shipment plan if there is only one demand stream. However, once you start adding multiple demand streams with different booking and backlog characteristics, the story gets lost. Let's add another demand stream and then look at the aggregate demand picture for this family. This is a standard build-to-order demand stream with a target lead-time of six weeks. In this case, we would expect to see backlog to cover all of Period 1and half of Period2 Looking at the sheet, we see that there are 10 units past due and 100 units due in Month 1, making a total of 110 units in the backlog for Month 1. There are 50 for Month 2, which is about right if the target lead-time is six weeks. Now, if we add both demand streams together, we see the total demand plan that would represent the top three sect ions of the 5-Sect ion Sheet. The aggregated demand shows that we are booked so lid for Month 1and have 60 units that need to be booked and shipped for Month 2 .From this presentation, we can see that we should protect space in Month 2 to maintain the target lead­ time for the build-to-order customers If we were only looking at the shipment plan, and not the backlog, this wouldn't be clear. Most of the organizations we work with have multiple demand types for each of their families. To get to the story, they need a consistent format for each of the demand streams that are aggregated into the family plan. With this approach, they are able to treat the intelligent demand streams in the same manner as they treat their other types of demand and thus develop a clear and logical statement of total l family demand. If you want to chat about this with me, feel free to contact me at dmcleod@dbmsys.com look forward to hearing from you! At DBM, we provide your team with coaching and the tools needed to run an effective S&OP process. Through the Virtual Accelerator process, you can implement a sustainable Executive S&OP process in just six months. Not quite sure how to incorporate these best practices into your S&OP process? We can help! Reach out to us. We can help you unlock the power of S&OP in your organization.

View this article as a PDF here. Our last article identified the key characteristics required to have an effective Executive S&OP process, particularly around the design of the Executive S&OP presentation. In this article, we will outline how to establish and maintain a clear planning horizon. Executive S&OP is a future-focussed planning process. The goal of the process is to link strategy and execution and ensure that you have the capability and supply right-sized to achieve both strategic and execution goals. The process should cover a minimum rolling 12-month horizon. For any business that has seasonality, this horizon will give a full view of seasonal fluctuation to support inventory and capability planning. A 12-month rolling horizon is also typically long enough to identify where volume shifts are going to require increase in staffing and capital to adjust capability to meet volume shifts. Most importantly it extends the planning beyond a fiscal year, which gives visibility to the impact of planned end-of-year decisions such as an inventory reduction or shipping pull-ahead. It is recommended to extend the planning horizon out to the end of the next fiscal year as you enter your budgeting cycle. Typically, this is in month 7 or 8 of the current year. This allows you to use the established Executive S&OP discipline as a primary input into the budgeting process. For some businesses the horizon should be longer than 12 months. Some examples of this are: The horizon should cover your cumulative supply chain lead-time (CSCLT). The CSCLT is the longest lead-time components in your bill of material offset by the sum of the manufacturing lead-times that use that item. Project businesses or business with significant customer lead-times. These businesses typically will have significant future customer orders or backlog. The S&OP horizon should cover all (or the majority) of your aged customer backlog. Businesses with significant strategic changes (growth, new products). Projecting the S&OP horizon out further may be required to gain confidence in the plans for future expansion. This can be done as needed in the process and may require less granularity. The primary focus should be beyond month one. Month one (or the current month) is already in process when you are going through the S&OP cycle. You are executing the plans that you have already put in place. For most businesses, your supply chain and/or manufacturing lead-times are such that volume changes in the first month are difficult and potentially costly. While there may be some adjustments to the first month plan, for the most part this should be considered as set. Both Sales and Operations should understand the family planning horizons. These are sometimes called frozen and firm zones. These zones are where volume changes can or cannot be made. The frozen zone is where a volume change is nearly impossible or extremely difficult (costly). Changes in this zone should be avoided, due to negative impact on efficiency and material costs. Setting the appropriate buffers (inventory, upside flex) as part of the S&OP process will support reacting to volatility in this zone. Establishing clear planning horizons will support your forwarding looking S&OP plans. This is one of the key elements that can make your S&OP a more effective process. See the Executive S&OP: Best Practices to get a full picture of what an ideal process should be like. You also can watch our related video, Good S&OP Part 5: Planning Horizons which expands on implementing these points into your S&OP process. DBM Systems provides organizations with the coaching and tools to quickly start and sustainably run an effective S&OP process. Through the Virtual Accelerator process, you can implement a Executive S&OP process in just six months. Not quite sure how to incorporate these best practices into your S&OP process? We can help! Reach out to us. We can help you unlock the power of S&OP in your organization. How effective is your S&OP? Evaluate your process and get recommendations. At DBM Systems, our consultants have over 20 years of experience providing S&OP leadership to businesses worldwide. We equip teams with coaching and the tools needed to run an effective S&OP process. Learn about our process and unlock the power of S&OP in your organization.

PRESS RELEASE DATE – September 20, 2022 1:00 PM EDT KITCHENER, September 19, 2022 – We are excited to announce the launch of our new online Executive S&OP Assessment. This assessment helps evaluate your businesses’ current S&OP process and provides recommendations for improvement. Created for organizations which currently have or are just starting to implement a Sales and Operations Planning (S&OP) process. We recommend that multiple people in your organization independently complete the assessment to provide a clearer picture of how the process is perceived across your organization. This assessment draws on our 20 years of experience helping clients successfully implement S&OP with repeatable results. The Executive S&OP Assessment will benchmark your S&OP process in eight key areas which are as follows: Family Structure Executive Presentation Planning Horizon Meeting Cycle Executive Engagement Responsibility and Accountability Supporting Data Measurements After completing the assessment, you will receive detailed customized feedback based on the answers you provided to help you identify ways to make your S&OP process more effective. We hope that this assessment provides valuable insights to you and your organization. About DBM Systems DBM Systems Ltd. has been at the forefront of Sales and Operations Planning (S&OP) thinking since 1980. Their team of consultants are providing proven S&OP solutions for industry leaders across the world. DBM has coached and equipped teams with the tools needed to run an effective S&OP process. Unlock the power of S&OP in your organization. Find out more at www.dbmsys.com

View this Article as a PDF here. Our last article identified the key characteristics required to have an effective Executive S&OP process, particularly around the design of the monthly cycle. In this article, we will dive into the best steps to follow for an Executive S&OP presentation. The structure and information presented in the Executive S&OP meeting is critical to an effective process. The Executive meeting is limited to one to two hours each month, so you need to make it count. Think of each family presentation as a “story” about what is going on in that family. Telling the story requires a focused, predictable, data driven presentation to keep the meeting on track and drive decision making. What is covered in this article is the recommended core of the Executive presentation. These are the key elements of an effective Executive S&OP presentation: Data should be organized and presented by family. This means sales, operations, supply chain, and engineering (new products) data should be presented at the same time for each family. Avoid having sales present demand data for all families, then switching to operations for all of the supply data. This will make it difficult to connect the demand and supply pictures for each family. You may provide a brief summary across the business at the beginning or the end of the meeting, however it is important that the balanced S&OP plan is presented by family. The presentation should be prepared and distributed at least 24 hours before the meeting. Doing this will provide the participants (in particular your Senior Executive) time to review and familiarize themselves with the data. If the data follows a standard format across the families and from month-to-month it will be easy to review, understand the “story” for each family and prepare questions. If everyone comes prepared to the meeting, meetings will be more efficient and drive better decisions. Follow a consistent format for each family. Using a standard presentation means participants can focus on what is being presented without having to translate data from different chart formats as you move through the families. Consistency on what is presented for each family will also increase accountability and engagement as everyone understands what is expected and what is presented. We recommend using the 5-Section Sheet to consolidate family data and get to the core of what is happening in the business. The core of the presentation should at least include the following elements. Other slides may be required to cover such items as new product introductions or key sales initiatives, but the following should be covered. The balanced family plan – the single version of the truth. We recommend using the 5-Section Sheet to present this core data for each family. This will provide a full view of the bookings, shipments, backlog, production (supply), inventory, and capability. It should cover the past (for validation), present (for accountability), and future (for execution and strategy). Family Characteristics or Family Definitions: This includes some description of what is in the family, demand segmentation, lead-times, buffer strategy (Inventory Targets, lead times), key measurements, and accountability. You may not cover this slide, but documenting these characteristics will keep everyone on the same page. This is especially critical as new members join your team. Documentation of Risks and Assumptions: These provide the background behind the plan numbers. Learn more about risks and assumptions. Measurement of last month’s performance compared to plan. Out of tolerance performance should drive to root cause analysis. Performance should be measured for bookings, shipments, and production. Identification of decisions required. Not all families will require decisions, but we recommend having a placeholder slide for each family. The Executive S&OP presentation is just one of the key elements that make your S&OP a more effective process and help increase executive engagement. See the Executive S&OP: Best Practices to get a full picture of what an ideal process should be like. You also can watch our related video, Good S&OP: Executive Presentation , which expands on implementing these points into your S&OP process. Not quite sure how to incorporate these best practices into your S&OP process? We can help! Reach out to us. We can help you unlock the power of S&OP in your organization. DBM Systems provides organizations with the coaching and tools to quickly start and sustainably run an effective S&OP process. Through the Virtual Accelerator process, you can implement a Executive S&OP process in just six months. How effective is your S&OP? Evaluate your process and get recommendations. At DBM Systems, our consultants have over 20 years of experience providing S&OP leadership to businesses worldwide. We equip teams with coaching and the tools needed to run an effective S&OP process. Learn about our process and unlock the power of S&OP in your organization.

View this Article as a PDF here. Our last article, Effective S&OP: Product Family Design, identified the key characteristics required to have an effective Executive S&OP process, particularly around the design of product families. In this article, we will dive into the best steps to follow for an S&OP monthly process. The standard Executive S&OP process is based on four separate meetings that occur in a monthly cycle. The monthly meeting cycle provides a data-driven decision-making framework to move from an unconstrained demand plan through to a balanced family plan. The process culminates in the Executive S&OP meeting where the business leader signs off on the proposed plan. The diagram below shows the meeting cycle. A brief outline of each step in the process and how it is tied to establishing RACI is provided below. For each meeting, the steps, outlined as a checklist, should occur to move you through a well-executed S&OP process. Additionally, the accountability and responsibility within a RACI (responsible, accountable, consulted, and informed) framework should be clearly defined for each meeting. Accountability refers to the person that is held to account for the outcome of the process (the final plan), while responsibility refers to the person that that makes sure the task gets completed or develops the plan. At DBM, we provide your team with coaching and the tools needed to run an effective S&OP process. Through the Virtual Accelerator process, you can implement a sustainable Executive S&OP process in just six months. One of our key tools puts all the critical data in one place on the 5-Section Sheet so your team can get to the true story of the business. Throughout this article, we use the 5-Section Sheet to show which plans to focus on for each meeting. Pre-S&OP Demand Meeting: Meeting Checklist: Review last month’s performance Review bookings, shipments, and backlog plans by demand stream Check reasonability of overall demand plan (sum of the demand streams), adjust if required Update Risks and Assumptions Approve unconstrainted demand plans Outcome: The outcome of the pre-S&OP demand meeting should be an unconstrained demand plan. This plan should include projected bookings, shipments and backlog and be segmented by major demand types (demand streams). Accountability: Sales Leader (VP of Sales) Responsibility: Demand Planner/S&OP Coordinator 2. Pre-S&OP Supply Meeting: Meeting Checklist: Review last month’s performance Determine ability to support the unconstrained demand plans, create constrained plan if required Update Risks and Assumptions Approve supply plans Outcome: The primary output is an agreed-on supply plan by family and site that respects your current or planned capability. In the case that supply is constrained, a recommended constrained shipping plan should be developed. Accountability: Operations Leader (VP of Operations) Responsibility: Master Scheduler or S&OP Coordinator 3. Pre-S&OP Meeting: Meeting Checklist: Finalize plans Identify any unresolved issues Identify the story for each family Finalize Risks and Assumptions Outcome: A proposed plan for each family that includes: a constrained shipping plan, booking and backlog plans, production (supply) plan, inventory plan, and capability plan. Accountability: Team ownership by VP of Sales and VP of Operations Responsibility: S&OP Coordinator 4. Executive S&OP Meeting: Meeting Checklist: Review plans family by family Issues needing resolution are presented Action items captured Agreed sign off on each family plan Outcome: Plans for each family, site, and identified actions to achieve these plans are agreed on. Accountability: Business Leader (CEO/President) Responsibility: S&OP Coordinator Furthermore, the following recommendations will make the process more effective: Define clear ownership and outcomes for each meeting of the process. This will ensure the right people are present and there are clear objectives in the meeting. Ensure that people come prepared to each meeting. For example, the demand meeting is not where the demand plan is developed, but rather where it is reviewed, validated, and agreed on. This means that data should be prepared and available in advance of each meeting (at least 24 hours recommend) to ensure that all can review it before coming to the meeting. This is especially true for the Executive S&OP meeting in order to keep it on track. Schedule the meetings six to twelve months in advance. This will ensure that the meetings get on peoples calendars well in advance, so schedules can be worked around the S&OP meetings. Allow time between the meetings for preparation and to resolve issues. Measure your adherence to the cycle. We recommend three areas for this: Participation, Data and Schedule (see our article: The S&OP Meeting Scorecard: Measuring the Fundamentals of S&OP). Establishing a monthly cadence, along with the recommendations, will be foundational for your S&OP process. The monthly process is just one of the key elements that make your S&OP a more effective process and help increase executive engagement. See the Executive S&OP: Best Practices to get a full picture of what an ideal process should be like. You also can watch our related video, Good S&OP: Monthly Process, which expands on implementing these points into your S&OP process. Not quite sure how to incorporate these best practices into your S&OP process? We can help! Reach out to us. We can help you unlock the power of S&OP in your organization. DBM Systems provides organizations with the coaching and tools to quickly start and sustainably run an effective S&OP process. Through the Virtual Accelerator process, you can implement a Executive S&OP process in just six months. How effective is your S&OP? Evaluate your process and get recommendations. At DBM Systems, our consultants have over 20 years of experience providing S&OP leadership to businesses worldwide. We equip teams with coaching and the tools needed to run an effective S&OP process. Learn about our process and unlock the power of S&OP in your organization.

View this Article as a PDF here. In our last article we identified the key characteristics required to have an effective Executive S&OP process. In this article, we will dive into designing an effective product family for S&OP. This is an updated article of S&OP Families Ties. The foundation of a good Executive S&OP process starts with your S&OP family structure. S&OP families must segment your business in a way that facilitates planning, decision making and tracking to your strategic priorities across sales and operations. All data and presentations for S&OP should be managed and discussed at the family level. This needs to be managed at a level of granularity that is meaningful but not too detailed so as to lose executive involvement. S&OP families should also have five key traits to make the most of your S&OP process: S&OP families should be constraint-based. If you are going to sell something you have to be able produce it or procure it (in the case of buyouts) when the customer wants it. Your ability to do this is determined by constraints. Changing your supply level, or capability, typically means changing your constraints. Determining whether this is necessary requires aggregating the demand plan and viewing it in aggregate by the constraint. This means that all products that are produced off a particular resource, for example a production line, should be in the same family. When you are unable to change your constraints by increasing capability, your S&OP process should highlight the trade-offs that might be required to meet demand. Within a constraint-based family you should be able segment demand into market facing views or demand streams. This will support moving from an unconstrained view of demand to a constrained view. This improves demand planning by allowing you to apply the appropriate demand planning technique for each demand stream (opportunity management for projects, instead of statistical forecasting for flow). You will be able to drive specific go-to-market strategies and track results. It will also provide accountability for the plan and performance within the Executive S&OP process. Ultimately, the demand plans need to roll up to a constraint-based view. You can do all kinds of great work to develop a really accurate demand plan but if you are unable to align your supply strategy and capability, you will not be able to effectively meet demand. If you can’t build it, you can’t sell it. Data across sales and operations needs to be in a common unit of measure for Executive S&OP. Typically, this means you should be using “units” or “pieces”. Sales and Operations must be speaking in the same language. Common units mean that bookings, shipments, backlog, production, capability, and inventory are standardized to present a complete story across the family. Revenue does not work well as it introduces the variables of mix, pricing and potentially exchange rates and must be translated into meaningful numbers for supply and capability. Common units may be pieces, labour hours, volumetric (e.g. tonnes). Once you have balanced the S&OP plan, you can convert it to other units of measure, such as revenue to connect to other planning processes. The family structure should support the planning and management of your strategic buffers. By starting from constraints and using common units, you should be able to set, measure, and plan strategic buffers. This includes the buffer between orders and shipments (backlog), between shipments and supply (inventory), and between supply and capability (upside flex). You should have no more than 15 to 20 families in your Executive S&OP process. Having more than 15 families is too granular for the Executive discussion. To put this in perspective, if you have 20 families, all of equal volume, each family would represent only 5% of the entire business. A family that is only 5% of the business may not warrant a discussion at the Executive S&OP meeting. In most cases 4 or 5 families will represent the majority of the business. You can consider combining families for the Executive S&OP process. This may mean data, discussions, decision making in the pre-meetings and leading up to these meetings may need to be at a more detailed level. Incorporating these traits will lead to having a family structure that is clear, focused, and supports the business strategy. This is one key way to build an effective S&OP process that works for your business. You also can watch our related video, S&OP: Family Design, which expands on implementing these points into your S&OP process. At DBM, we provide your team with coaching and the tools needed to run an effective S&OP process. Through the Virtual Accelerator process, you can implement a sustainable Executive S&OP process in just six months. Not quite sure how to incorporate these best practices into your S&OP process? We can help! Reach out to us. We can help you unlock the power of S&OP in your organization. Take the Executive S&OP Assessment to evaluate your S&OP process.

View this Article as a PDF here. Many organizations say they have an S&OP process, but the critical question to ask is whether it is effective. With the work and time invested into S&OP, you need to see results. A good and effective Executive S&OP process is one where the person who is managing the business (Senior Executive, CEO, President etc.) is also leading the S&OP process. If this isn’t happening, the business needs to figure out why and change. The very definition of S&OP is based on this principle: S&OP is a management decision making process that provides management the ability to strategically direct their business to achieve a competitive advantage on a continuous basis. Without executive engagement you are not unlocking the full potential for Executive S&OP as a decision-making management process. The following questions are a quick litmus test for Effective Executive S&OP: Is your Senior Executive engaged? Do they require the monthly Executive S&OP meeting? Does your team make decisions in the S&OP meeting (It’s not a report out)? Does your S&OP presentation cover the entire business in 1 hour to 1.5 hours? Does everyone walk out of the meeting on the same page and know what they need to do to execute the plan? If you answer “yes” to the questions above, it is very likely you have an effective S&OP process. If the answers were “no,” what are the potential stumbling blocks to getting there. In this article, we will briefly identify the key characteristics that enable executive engagement so that you can have a truly effective S&OP process. Over the next several weeks we will dig into each of these areas in more detail. Best Practices for Effective Executive S&OP 1. S&OP Family Structure What this looks like: The business is segmented into the right elements to support decision making. All the decisions (flow rate, buffers, accountability) are set by family. Key points: Families are segmented by constraint. The families are consistent across sales and operations. Families are discussed in the same units of measure throughout the S&OP presentation. 2. Monthly Process What this looks like: The monthly process is regular and purposeful: a plan is created, then executed, results are assessed, then next month, the plan is redone or adjusted. The monthly cadence supports accountability and forward planning across the planning horizon. Key Points: The planning process should move from unconstrained demand, to supply, to constrained demand, and end with the Executive meeting. The plan should be well documented and understood by the team. 3. Executive Presentation What this looks like: As the culmination of the monthly process, the Executive Presentation – where the decisions are being made – is where the executive intersects with the process (prior to this being run by other resources). The structure and format must provide a clear “story” for the business (by family) in the past, present and future with supporting data. Key points: The presentation follows a standard format that covers the S&OP plans family by family for Sales and Operations. 4. Planning Horizon What this looks like: Since S&OP is a forward-looking process, it needs to support planning far enough out in the future to support both execution and strategy. Key points: This should be at least 12-months rolling and cover the cumulative supply chain lead time (CSCLT). The team needs to understand the planning zones – where changes can be made and the tradeoffs of a change. 5. Responsibility and Accountability What this looks like: Accountability (who the executive is expecting to deliver the results) and responsibility (who has to get it done) for the plan is clearly defined and documented. Key Points: Sales owns the booking plan, Operations owns the supply plan and the shipping plan is an outcome of the process. If the plans are out of tolerance – the accountable person should know why. This is understood by everyone and reinforced by the executive. 6. Supporting Data What this looks like: The S&OP process pulls data from your ERP system. Note: If the data is bad, S&OP should highlight that a data clean-up needs to happen. Actual historical data (bookings, shipments, aged backlog, production) is used to evaluate the performance to plan. 7. Measurements What this looks like: S&OP should deliver results like improved customer service, reduced expedited freight, right-sized inventory. Before you get results, you need to make sure you are doing the right things (a good process) and the right things are being done right (effectively). Key Points: Measurements are used to improve the process, and reinforce accountability. Measurements should be at three levels: the process, effectiveness, results. Process measurements include tracking meeting attendance and data gathering. Effective measurements evaluate plan accuracy. Finally, the business results (OTD, etc) should be tied to families so that they are actionable. 8. Executive Engagement (Ownership) What this looks like: The person running the business uses the Executive S&OP meeting as a critical management meeting. They attend and/or run the meeting, hold the team accountable, and sign off on the SS&OP plans. Incorporating these elements is sure to make your S&OP a more effective process and increase executive engagement. Over the next several weeks we will dig into each of these areas in more detail, starting with setting the correct S&OP Family Structure. You also can watch our related video, S&OP: What does good look like?, which expands on implementing these points into your S&OP process. At DBM, we provide your team with coaching and the tools needed to run an effective S&OP process. Through the Virtual Accelerator process, you can implement a sustainable Executive S&OP process in just six months. Not quite sure where to start incorporating these best practices into your S&OP process? We can help! Reach out to us. We’ll help you unlock the power of S&OP in your organization. How effective is your S&OP? Evaluate your process and get recommendations. At DBM Systems, our consultants have over 20 years of experience providing S&OP leadership to businesses worldwide. We equip teams with coaching and the tools needed to run an effective S&OP process. Learn about our process and unlock the power of S&OP in your organization.

View this Article as a PDF here. The current supply chain shortages have increased the focus on documenting and understanding risks and assumptions but these should always be part of your S&OP process. Risks are significant concerns or challenges that could impact any part of the plan – from demand to production or supply. Looking ahead, businesses review risks and prepare an upside and downside plan based on scenarios that are outside of the norm. While risks are something out of the norm, assumptions are "how" we plan on dealing with or accounting for the risk. Every risk requires an assumption, but not all assumptions deal with an identified risk. Sometimes these risks and assumptions are simply verbalized in a meeting, but truthfully, they should always be documented and discussed. In this article, we outline why it is important and some best practices to follow. Why Document Risks & Assumptions The future is uncertain. Forecasts by definition are inaccurate. In S&OP meetings, you should not only have a clear plan but be able to outline and support how you arrived at it. S&OP is a monthly cycle. Significant time and events happen between each cycle. In each Executive S&OP meeting, you will review last month’s plans. What were the assumptions and risks that were baked into that plan? Implementing learnings from the last cycle will bring about S&OP planning improvements. Measuring performance to the plan only tells part of the story. A missed opportunity could have been caused by changing conditions or a bad assumption. One way to be sure is to clearly identify the root cause, so review why. Accountability. The team needs to be able to provide a reasoning behind their plan. How did sales come up with the booking plan? An executive will want to know the rationale behind the plan or if it was made off the cuff. Now that it is clear why risks and assumptions should be part of in your S&OP process, here are eight best practices to help you get started. Best Practices for S&OP Risks & Assumptions Document them: Don’t just share them in the meeting but create a record. The S&OP Coordinator should have a key document that is used to track all risks and assumptions made in the plan. Utilize a standard format: S&OP is a repeated process. Create a standard Risk and Assumptions sheet that will follow the same format each time. Be specific about timing: Indicate when the risk/assumption will start and the duration. Be specific as possible about quantity: Is there a delay of some or a lot of components? There is a big difference between 50 and 5000 pieces. It helps to be more specific. Indicate a clear numerical quantity. Assign them to a specific part of the plan: Whether the assumption came up during Demand Planning or the final S&OP plan, be clear which part of the plan is affected and who needs to be informed. Identify whether or not it was included in the plan: A risk may have been noted but the plan can still proceed without factoring the risk in. The risk may still need to considered for the next plan. Include them in your Executive presentation: The final S&OP plan should always include what risks and assumptions were made in the plan. Be prepared to use these to support how you arrived at the plan. Revisit them the following month: For the next S&OP cycle, review changes made to the plan and evaluate the results. Learn from your findings and determine whether to adjust the next plan accordingly. If you aren’t doing this today, don’t be intimidated. Start simple. Document the risks and assumptions in your current S&OP for a single product family. Next month, circle back and validate or adjust the assumptions. From there, you can integrate them into other product families. You’ll be guaranteed that doing this will add a level of credibility and depth to your S&OP discussions and decisions. Watch our related video, Risks and Assumptions, where Doug expands on implementing these points in your S&OP process. Not quite sure where to implement this concept into your S&OP process or even how to start one? We can help! Reach out to us. We’ll help you unlock the power of S&OP in your organization. How effective is your S&OP? Evaluate your process and get recommendations. At DBM Systems, our consultants have over 20 years of experience providing S&OP leadership to businesses worldwide. We equip teams with coaching and the tools needed to run an effective S&OP process. Learn about our process and unlock the power of S&OP in your organization.

View this Article as a PDF here. This is the third article in my series on the Executives guide to S&OP. The goal of these first three articles is to provide a “primer” on the Executive S&OP Process. Prior to this article, I covered what you should expect out of S&OP (5 Outcomes) as well as what your role (Management and Participation) should be. Now it’s time to get into the details: What is at the core of making the process work? ASCM (APICS) defines an effective S&OP process as: “[S&OP] guides business decisions, provides key problem-solving strategies, gives executives greater control over the enterprise and drives overall business success.” I have seen this definition working in practice in many organizations. Getting the process to this point in your organization, however, takes work. Work that is made easier if you start with the right fundamentals: A single story for each family Constraint-based S&OP families Data Driven Presentations Clear Accountability for each part of the plan So, let’s get down to the nuts and bolts. First, the sales/marketing presentation should be directly connected to the supply presentation for each family. This is sometimes called “A single version of the truth.” A quick check on this is to look at the structure of your Executive S&OP slide deck: Is it by function or by family? A functionally structured presentation typically will have all the sales/marketing slides presented together, followed by all the production, supply, and inventory slides. In this format, sales present their “story” of the entire business, followed by the operation’s “story”. In contrast, a FAMILY-based presentation covers all aspects of demand and supply, family by family. This simple change to the presentation provides the following benefits: Forces definition of a “family” to be the same across the organization. While this may create conflict on how to define the family, doing this removes ambiguity and forces alignment between the plans. Creates a linkage between sales/marketing initiatives and supply capability. A projected price increase that is expected to drive up short-term sales needs to be matched with increased output or anticipation inventory to fulfill demand. Secondly, S&OP families should be determined by constraint. Think production line, assembly area, or specific supplier. Demand plans should be determined and set from an externally facing view, but they need to consolidate into an internally focused constraint-based view. This view is key to decision making in S&OP: It validates current flow rate (capability) and alignment with demand levels. Helps to identify when capability increases (investment) or decreases are required to meet the required flow rate. Formalizes and communicates your buffer decisions (inventory, upside flex capacity, and/or backlog) to handle the variation or imbalances between demand and supply. I will cover more on this in later articles however, your key takeaway should be if your Executive S&OP presentation doesn’t aggregate to a constraint-based view, you are missing out on decision-making clarity around capability. Third, your S&OP presentation should be data-driven. The data needs to be clearly defined and understood by the key participants. Graphs can be used effectively once a process is in place and understood, but you should start with the numbers. This will highlight where there are disconnects and where the story doesn’t add up. A couple of guidelines. Use the following data elements to put together a complete picture for each family Bookings: incoming orders (actual and projected) Backlog: open orders time-phased by the month you expect to ship them Shipments: Shipments (actual and projected) Production Receipts: (actual and project) In the case of buy-for-sale families this will be purchase orders. Inventory: This is your finished goods inventory plan Put the data together into a single presentation. We call this the 5-Section Sheet (because there are five sections). The math should add up for all of the data. For examples bookings minus shipments should end up in backlog or open orders. Production minus shipments should result in inventory. Validate this monthly. Feed your S&OP presentation directly from your planning systems. Starting with collection of actual data monthly, you can validate that systems and processes line up with your view of the aggregate story. Linking the future plans from S&OP to your planning systems is also necessary but shouldn’t be the focus if you are just getting started. Fourth: you should have clear accountability for each part of the family plan. This is where it pays to be specific. Let’s look at the data elements of an S&OP plan, that I identified in the previous section (bookings, backlog, shipments, production, inventory) to see where the accountability should lie. We will start with the easy ones: Bookings and Supply. Bookings: Accountability for bookings (incoming orders) is clearly linked to sales or marketing. The demand generators of the business. Shipments: The shipment plan is an output of the process. Sales is accountable for the unconstrained shipment plan; however, the final shipment plan needs to be supported both by bookings (sales) and production (operations). This is the constrained shipment plan, and you are accountable for signing off on this plan. Production (supply): Accountability for production is operations. They are responsible for setting and delivering the production plan. This needs to link to the master schedule and material plan (supply chain). Backlog and Inventory are both outputs of the plan. They are both strategic buffers between customer demand and supply capability. You should set a target for both of these, and use the process to monitor where you are at. I will cover this topic in more detail in future articles. Getting to an effective S&OP process starts with the right fundamentals: A single story for each family – link demand and supply Constraint-based families Data-Driven Presentations Clearly-defined Accountability Getting these nuts-and-bolts details right, will put you on the path to greater control over your enterprise and driving overall business success. How effective is your S&OP? Evaluate your process and get recommendations. At DBM Systems, our consultants have over 20 years of experience providing S&OP leadership to businesses worldwide. We equip teams with coaching and the tools needed to run an effective S&OP process. Learn about our process and unlock the power of S&OP in your organization.

View this article as a PDF here. How many times have you heard: “The President your company has a critical role to play to the success of… insert project name here”? For any major change project that impacts culture, crosses departments, and/or requires significant resource, the business leader is typically highlighted as a critical resource. In S&OP, your role is different. S&OP doesn’t just require your executive sponsorship – S&OP is YOUR process. You should expect the process to help you identify and arbitrate conflicts between sales and operations and have confidence that your team is able to move from strategic objectives to operational execution. To achieve this, there are two aspects to your role: Management and Participation. Management encompasses how you enable your team to be successful in their roles. Participation includes the tasks or activities you have to perform as part of the monthly cycle. Let’s look at your management role first. This includes: Having overall accountability for the S&OP process. As stated before, this is YOUR process. You are the only one that can take accountability for getting it in place. It needs to work for you. Providing resources to get the process in place. The key resource, especially starting out, is the S&OP coordinator. The coordinator needs to be organized, proactive, and able to bring the proper people to the table. Someone you can trust. In addition, consider outside expertise to provide the direction and experience to move your organization through this significant change. Holding your team accountable. Establish clear RACI and expect your team to deliver. In simple terms, sales need to be accountable for bringing in the orders and developing the booking plan, while operations have accountability for production performance and future plans. Be specific, expect answers, and expect a clear understanding of the risks going forward. Secondly when it comes to the monthly S&OP participation, your role is to: Show up. It may sound blunt, but it is especially important early on as you build momentum in the process. It’s your meeting, so you need to be there. When working well, the Executive S&OP meeting will be your critical monthly management meeting; but you won’t get there if you don’t start by showing up. Review the S&OP plan(s) PRIOR to the Executive S&OP meeting. You should review each family plan and check that it makes sense. This may sound onerous, but by using a standardized presentation you should be able to run through this in half hour. This data will help you develop “the Story” for each family prior to the meeting. What your team presents should match this story. Settle the constrained shipment plan. The plan must balance between sales and operations. If they could not reach agreement in the pre-S&OP meeting, or if you feel their decision needs modification, be prepared to make that call. Be prepared to take action on the family plan. The Executive S&OP meeting shouldn’t be just a report out. Seldom will business be at an equilibrium; as you move from strategy to execution, major changes to resources may be required. This may include capital expenditures, manpower changes, significant changes to purchases, and changes to the targets for the inventory and backlog buffers. These decisions should be clearly presented, and you need to be prepared to make them. Be prepared to defend the plan to corporate. Sometimes the results don’t match what you’ve committed to, or the future may not look the same as previously planned. With a process that is working well, you will not only trust the plan, but you will have the details you need to backup changes to the plan. As an executive, your role in S&OP is not only critical – it is essential. S&OP will only deliver outcomes and results if you both manage and participate fully. If your S&OP process isn’t meeting your expectations, start by looking in the mirror and asking yourself if you are filling your executive roles. How effective is your S&OP? Evaluate your process and get recommendations. At DBM Systems, our consultants have over 20 years of experience providing S&OP leadership to businesses worldwide. We equip teams with coaching and the tools needed to run an effective S&OP process. Learn about our process and unlock the power of S&OP in your organization.

View this article as a PDF here. Why do I need a Sales and Operations Planning process? We can get caught in the trap of thinking about S&OP as an organizational exercise. While this is true to some degree, ultimately the companies that derive the most benefit from an effective S&OP process have one thing in common: Leadership has asked and answered this “why” question. I’m not saying that every successful S&OP implementation starts here, but for the process to really work and stick within the culture of an organization, at some point the leader must come to a clear understanding of the outcomes and benefits of Sales and Operation Planning. I use the terms outcomes and benefits on purpose. Many S&OP implementations start with a focus on the hard benefits of the process. This makes sense; if you are going to invest in a new process, it’s important to know what the return will be. Typically, these include service level improvements (RDSL, PDSL, OTIF, etc.), inventory right sizing (trade working capital improvements), improved efficiency, and reduced expedited freight among others. Interestingly, nearly all the executives I’ve asked over the past 20 years answer the “why is S&OP important” question not with hard benefits, but with what the process gave them in terms of leading their business. These are the outcomes. So as an executive, what should you expect from an effective S&OP process? Here are my top five. 1. A clear link between strategy and execution. The process needs to cover the short (execution), medium (planning), and longer (strategic) horizon. Accountability for execution is the feedback required to adjust execution and planning. The clarity of the S&OP plan is important to ensure that everyone understands and is aligned around the strategy. This is particularly important when managing growth/significant business volume changes whether planned or unplanned. 2. A place to set the flow rate for the business. Flow rate applies to all businesses. It’s the number of units, customers, goods, or services that your business is capable of producing in a period of time. S&OP is where you can validate your current flow rate for the family and, most importantly, set your future flow rate (capability) to meet your business plans. The need for changes to capability should be clearly visible and presented as part of the process. 3. A place to establish clear accountabilities: RACI (particularly Responsibility and Accountability). A good process not only covers RACI for it’s plans and results, but also for the steps of the process. You should be able to hold the key players, sales, operations, supply chain, and product management, accountable for their part of the overall plan. Each person KNOWS their part. 4. A regular and repeatable management process. It starts with an unconstrained, externally focused view of demand: the demand meeting. Next, in the supply meeting, you determine your output rate based on capability. The team then resolves any imbalances between the demand and supply plans and the impact on your buffers. The executive meeting provides a focused, data-driven presentation highlighting the risks and assumptions, trade-offs, and decisions required. This should happen like clockwork. 5. Measurability. Ultimately S&OP needs to be measurable. While measurability ties to the other outcomes, it’s worth highlighting on its own, because for a process to really stick and change the way the business is managed, it needs to be measurable in the following areas: Data: Forward looking plans need to be data-driven and linked to the execution and planning systems. Disconnects should be identified early and drive improvement processes. People: Roles need to be documented, and expectations set on who brings what to the process. Only by measuring this will the accountability and responsibility stick within the organization. Process: A clear monthly process should be laid out and adherence to the process should be measured. If your S&OP process is effective, you should expect your executive meeting to enable you to put your finger on the pulse of the business. This happens in one to two hours each month. Your team will know their roles, be prepared, and present data at the right granularity to support effective decision making. Step back and evaluate your process. Is it delivering these outcomes? If not, you are missing out on the full value of S&OP. The time may be now to get it tuned up. #ExecutiveCoaching #SalesandOperationsPlanning #Leadership How effective is your S&OP? Evaluate your process and get recommendations. At DBM Systems, our consultants have over 20 years of experience providing S&OP leadership to businesses worldwide. We equip teams with coaching and the tools needed to run an effective S&OP process. Learn about our process and unlock the power of S&OP in your organization.

Dicor Corporation has successfully implemented executive S&OP using DBM’s new virtual process. PRESS RELEASE – July 13, 2021 10:00 AM EDT KITCHENER, June 20, 2021 – We are excited to announce Dicor’s successful executive S&OP implementation as the first user of DBM’s Virtual S&OP Accelerator™ program. Over a 12-month partnership with DBM, Dicor grew their S&OP process from one pilot family to their entire operation: six months to complete the pilot, and six months to roll it out business-wide. Dicor Corporation began their partnership with DBM in July 2020 to implement an executive S&OP process that could manage significant end market growth post COVID. DBM deployed their new Virtual S&OP Accelerator™ over the next six months to establish an S&OP process for a pilot product family. This virtual process follows an event-driven framework to establish an S&OP process in six months. It has three phases: 1. Prototype Interviews and data-captures to establish a pilot product family Prototype the S&OP presentation 2. Preparation Building organizational involvement and knowledge through eLearning events Tool implementation and training 3. Pilot The organization takes full ownership of the new S&OP process for the pilot family We begin building a plan to extend the process beyond the pilot family Dicor participated in these consultation, eLearning, and implementation events to successfully complete the Virtual Accelerator™ as the first-ever user of this new virtual process. Says Group President, Anthony Wollschlager: “I didn’t have a process, and I didn’t know what to expect out of S&OP. By focusing on a pilot family, I was able to understand the process and my role. It was easy to expand to the rest of the business.” Over the last six months, Dicor has rolled out executive S&OP across the entire business – and they are already seeing results. “We’ve been able to reduce our inventory levels and improve our inventory health while growing the business in the most challenging supply chain environment I’ve ever seen,” says Wollschlager. “We are outperforming 95% of our market during a time of growth and uncertainty; that doesn’t happen by accident.” The completion of the Virtual S&OP Accelerator™ has equipped Dicor to better manage growth in an uncertain market and effectively unlock the value of S&OP. About Dicor Dicor Corporation has been a leading supplier of component products to RV manufacturers and other industries since 1984. It is the overall guiding force for four different companies: Dicor Products, Seal Design, United Shade and Vixen Composites; each of which operates independently while sharing a common ethic of service and innovative product development. Read more at https://dicorproducts.com/. About DBM Systems DBM Systems Ltd. has been at the forefront of Sales and Operations Planning (S&OP) thinking since 1980. Their team of consultants are providing proven S&OP solutions for industry leaders across the world. DBM has helped hundreds of organizations achieve their objectives, and they’re ready to help you, too. Find out more at www.dbmsys.com.