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Webinar July 21, 2011
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The 7 Habits of HighlyEffective S&OP
Dr. Mark Moon
Associate Professor of Marketing
Head, Department of Marketing & LogisticsDirector, Forecasting and Demand Management
Forum
University of Tennessee, Knoxville
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Todays Agenda
1. Tribute to Dr. Steven R. Covey (who developed the7 Habits) (So I dont get sued)
2.
Our vision of the ideal state of S&OP3. 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 mostimpactful self-help booksever written. 15 million copies sold,
translated in 38 languages
7 Habits framework hasbeen adapted to differentcontexts:
Happy kids Effective families
Effective leaders
Can it be a usefulframework for S&OPImplementation? 3
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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 OperationsPlanning)
Which we like to think of asDemand/Supply Integration
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Demand/Supply Integration
(otherwise known as S&OP) What is it?
The process by which a company makesstrategic decisionsbased upon market demand,
supply capabilities, financial objectives, and thestrategic 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 willbe singing out of the same hymnal
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Demand/Supply Integration (DSI):The Ideal State
Demand/SupplyIntegration
(S&OP)
SUPPLYProduction,
Logistics, etc., andUpstreamSuppliers
DEMANDSales andMarketing,
DownstreamChannelPartners
Finance
Capacity Forecast(Including inventory)
DemandForecast
Financial
Goal
Operational
Plan(supply and inventory)
DemandPlan
FinancialPlan
SeniorLeadership
StrategicDirection
AlignmentTo
Strategy
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So Now Lets 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 carefullydesigned by you. Thechoices, after all, are yours.Just remember that everymoment, every situation,provides a new choice. Andin doing so, it gives you aperfect opportunity to dothings differently to producemore positive results.
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Be Proactive Demand/Supply Integration doesnt 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. 9
Process = 40% Too ls = 10% Cultu re = 50%
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The Levers of Change Management
Process = 40% Too ls = 10% Cultu re = 50%
Information
and Systems
Clean data andcommon IT platforms
Culture & ValuesEverybody committed
to success through
openness and honesty
Metrics
&CompetenciesDoing the right thingsand measuring results
in the right way
Business ProcessesOne, standardised set
of processes, understood
across the business
OrganizationThe right structure with
people who havethe right responsibilities
and accountabilities
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Habit # 2 Begin with the End in Mind
Habit 2 is based on imagination--theability to envision in your mind what youcannot at present see with your eyes. It
is based on the principle that all thingsare created twice. There is a mental(first) creation, and a physical (second)creation. The physical creation followsthe mental, just as a building follows ablueprint. If you don't make a consciouseffort to visualize who you are and whatyou want in life, then you empowerother people and circumstances to shapeyou 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 thebusiness, not just for planning thesupply chain.
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An Example of One Companys 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)
5Executive
SIOP Meeting(Wk4)
5Executive
SIOP Meeting(Wk4)
1
Portfolio
& Product Review
(Wk1)
1
Portfolio
& Product Review
(Wk1)Integrated
reconciliation
& financial
appraisal
4
SIOP
Reconciliation
(Wk3)
4
DS
IReconciliation
(Wk3)
2
Demand & Inventory
Review
(Wk2)
2
Demand & Inventory
Review
(Wk2)
3
Supply Review
(Wk3)
3
Supply Review
(Wk3)
5Executive
SIOP Meeting(Wk4)
5Executive
DSI Meeting(Wk4)
1
Portfolio
& Product Review
(Wk1)
1
Portfolio
& Product Review
(Wk1)Integrated
reconciliation
& financial
appraisal
A continuouscycle ofevents
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Habit # 3 Put First Things First
Habit 3 is about life managementas well--your purpose, values,
roles, and priorities. What are"first things?" First things arethose things you, personally, findof most worth. If you put firstthings first, you are organizingand managing time and eventsaccording to the personalpriorities you established in Habit2.
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Put First Things First
Urgent Not Urgent
Important
Not Important
Quadrant 1
Quadrant 3
Quadrant 2
Quadrant 4
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The Challenge Eliminate Quadrants 3 and 4
Minimize time spent in Quadrant 1 byinvesting in Quadrant 2
The key: Dont prioritize whats on your schedule
Rather, schedule your priorities
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l d l
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As an Example -- Demand Planning ProcessFlow 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,
assumptionsand changes
Gap analysis &
Demand ReviewPrep 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
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Habit #4 Think Win/Win
Win-win sees life as a cooperative arena, nota competitive one. Win-win is a frame ofmind and heart that constantly seeks mutual
benefit in all human interactions. Win-winmeans agreements or solutions are mutuallybeneficial and satisfying. A person ororganization that approaches conflicts with awin-win attitude possesses three vitalcharacter traits: Integrity: sticking with your true feelings, values, and
commitments
Maturity: expressing your ideas and feelings withcourage and consideration for the ideas and feelingsof others
Abundance Mentality: believing there is plenty foreveryone
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Think Win-Win Many times, Demand Planning
processes break down because there is
a lack of trust between developersandusersof 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, doesnt sell theproduct and then supply chain gets blamed for too
much inventory?
Does the sales team complain that manufacturingcant deliver on its production commitments andits hurting sales?
Does manufacturing complain that the sales teamdoesnt let them know when new productintroductions should be scheduled, and then theycomplain 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 differentagendas.
Your incentive systems might be discouraging aWin-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, youprobably seek first to be
understood; you want to get yourpoint across. And in doing so, youmay ignore the other personcompletely, pretend that you'relistening, selectively hear onlycertain parts of the conversationor attentively focus on only thewords being said, but miss themeaning 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 theiropportunities and constraints, and thenmake forward-looking plans that benefit
the organization as a whole. This requires understanding, and
openness, of the realities that each
function faces. 23
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An Example from One Company of How
this Reconciliation Can Take Place
DSI Reconciliation Meeting Chaired by CFOAttendees:
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
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The Important Take-Away Here
The DSI Process provides a forum for
different functions to come together andmake decisions that benefit the organizationas a whole.
This process will not workif turf protection
is the order of the day! This process will workif participants seek
first to understand, then to be understood.
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Habit #6 Synergize
So put it simply, synergy means "twoheads are better than one." Synergize isthe habit of creative cooperation. It isteamwork, open-mindedness, and theadventure of finding new solutions to oldproblems. But it doesn't just happen onits own. It's a process, and through thatprocess, people bring all their personalexperience and expertise to the table.
Together, they can produce far betterresults that they could individually.
Valuing differences is what really drivessynergy.
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Synergize
For an effective DSI process, all the supporting processeshave to be working
Each function brings critical insights to the process, andwhen each function values the insights of the others, the
whole is greater than the sum of the parts. 27
Sales Management
Demand Management
Portfolio Management
Resource Management
Project Management Market Management
Supplier Management
Supply Chain Management
Logistics
Procurement
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Habit #7 Sharpen The Saw
Sharpen the Saw meanspreserving and enhancing thegreatest asset you have--you. Itmeans having a balanced program
for self-renewal.
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Sharpen the Saw In this context, renewalmeans continuous
enhancement of attitude, knowledge and
skills through education and training onvarious elements of S&OP or Demand/SupplyIntegration
Everyoneinvolved in an S&OP process, from
Demand Planners, to Sales, to ProductManagers, to Supply Chain people, to SeniorExecutives, needs education on the goals,strategies, and tactics of the S&OP process.
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LevelLevel
44
Level 3Level 3
Level 2Level 2 -- PractitionersPractitioners
Level 1Level 1 -- Foundation LevelFoundation Level
LevelLevel
44
Level 3Level 3
Level 2Level 2 -- PractitionersPractitioners
Level 1Level 1 -- Foundation LevelFoundation Level
Supply PlanningSupply PlanningDemand PlanningDemand Planning
An Example of How One Company has Invested
inSharpening the Saw
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In Summary Dr. Covey and his 7 Habits have
helped millions of people move from
dependence, to independence, tointerdependence.
There is wisdom there that can help
you to think clearly about your S&OP orDSI processes, and to achieve the goalsofIntegrated Business Planning
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Webinar July 21, 2011
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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Final Questions or Comments?