How to Execute the Monthly 5Step Process

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How to Execute the Monthly 5-Step Process
Tom Wallace (pinch hitting for Cathy Budd)
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• About Dow
• A Science and Technology leader located in
  Midland, MI
• One of the worlds largest chemical companies
• 110 years old
• 54 billion in annual sales
• 46,000 employees
• Markets Food, Personal Care, Building,
  Transportation, Paper, Water

• 42 on Fortune 500 list
• Over 200 manufacturing sites
• Approx. 3500 products
• Customers in 175 countries

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From 5,000 Feet
Sales/Marketing (Units/ by Family)
Finance (Dollars)
Centripetal
Shared view
Executive SOP A process to reconcile, agree
upon, and communicate the company game plan
Teamwork
President
Operations (Units/hours/Material)
Product Development (New Product Issues)
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Product Families and Supply Resources

• Product Families Supply Resources
• Customers - Plants
• Markets - Departments
• Application - Suppliers
• Product Usage - How the Product is Made
• What works best What works best for
• for Marketing and Production, Supply
• Sales Chain, Logistics, etc.

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The Product Family Hierarchy
Acme Widget Company
Consumer Bus. Unit
Industrial Bus. Unit
Families
Large Medium Small
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The Product Family Hierarchy
Acme Widget Company
Consumer Bus. Unit
Industrial Bus. Unit
Families
Large Medium Small
Subfamilies
Corded Wireless
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The Product Family Hierarchy
Acme Widget Company
Consumer Bus. Unit
Industrial Bus. Unit
Families
Large Medium Small
Subfamilies
Corded Wireless
Sub-subfamilies
Domestic Outsourced
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The Product Family Hierarchy
Acme Widget Company
Consumer Bus. Unit
Industrial Bus. Unit
Families
Large Medium Small
Subfamilies
Corded Wireless
Sub-subfamilies
Domestic Outsourced
SKUs
123 234 345 etc
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The Executive SOP Process
Step 1 Data Gathering
Sales Actuals, Statistical Forecasts Supply
Actuals
End of Month
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Role of Finance and New Product Development
Exec Meeting
Finance Department Involvement
Pre- Meeting
Supply Planning
New Product Development Involvement
Demand Planning
Data Gathering
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The Executive SOP Process
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Step 1 Data Gathering

• Collect historical information on demand,
  production and inventory
• Populate business performance metrics
• Simple step but can derail the entire process if
  incorrect!

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The Executive SOP Process
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Step 2 Demand Planning

• Aggregate information differently
• Develop commercial not manufacturing forecast
• Incorporate macro-economic information
• Manage forecasting as a process

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Aggregation of Forecast
Traditional
Forecast built around how products are
manufactured
New
Forecasts built around market application
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The Executive SOP Process
Step 1 Data Gathering
Sales Actuals, Statistical Forecasts Supply
Actuals
End of Month
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Step 3Supply Planning

• Possibilities
• No change to past plans
• Changes due to
• Forecast increase or decrease
• Actual FG inventory increase or decrease
• Target FG inventory increase or decrease
• New product(s)
• Supply/production problems
• Production reassigned
• Other dislocations freight, regulatory, etc.

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Supply Planning Recap

• Demand is the driver
• Where practical, adjust supply to demand
• Scenarios Plan A, B, C
• Costs
• Related issues, fallout
• Demand/Supply balance must be attained here or
  later

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The Executive SOP Process
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Pre-Meeting Objectives

• Resolve problems and conflicts, where possible
• Establish, where possible, demand/supply balance
  in product families and subfamilies
• Where not possible, develop alternative scenarios
• Set the agenda for the Exec Meeting

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Pre-Meeting

• Consensus requires that everyone1. Has had
  their say2. Feels they had opportunity to
  influence the outcome3. Can live with the
  outcome
• (Eli Lilly Compromise Meeting)

Conflict Confrontation Consensus
Harmony Get the Moose on the Table
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Pre-Meeting Attendees

• Key people from the demand planning
• and supply planning steps
• Demand
• Supply
• Finance
• New Products
• Process Owner

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Pre-Meeting Characteristics

• Frequency once per month
• Duration 3 to 4 hours on average
• Mindset
• If we were running this business,
• what would we decide to do.

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The Executive SOP Process
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The Exec Meeting

• Review of Total Business Performance ()
• Review of Customer Service Performance (fill,
  CSL)
• Review of Action Items from Last Meeting
• Decisions on Each Product Family, and on
  Resources as necessary
• Agenda Driven Discussion pertaining to
• Decisions of major consequence or risk
• Changes to existing Policy /or Strategy
• Review of critical performance difficulties
• Resolution of conflict with Clear Decisions
• Change Business Plan as appropriate
• Recap of Decisions Made
• Critique the Process

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Exec Meeting Participants

• Essential
• SBU Leader (Pres./GM)
• VP Sales
• VP Marketing
• VP Operations/Logistics
• VP Product Development
• VP Finance
• Probable
• Exec. SOP Process Owner
• Pre-Meeting Facilitator
• Demand Manager
• Supply Chain Manager

• Possible
• Customer Service Manager
• Forecast Analyst
• Product Manager
• Plant Manager
• Master Scheduler
• Purchasing Manager
• Product Development Manager
• Controller
• ????

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The Executive SOP Timetable
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Commercial Responsibility Product Manager
Marketing Manager Demand Analyst
Data Base Administrator
Monthly Sequential Calendar
Mfg and SC Responsibility Production
Leader TICA Leader
Site Logistics Leader Supply Chain Manager
Supply Chain Planner
Supply Chain Manager Marketing Leaders
Production Leaders Finance Leader
New Product Development
Area P/L Manager Supply
Chain Manager Production Leaders
Finance Leader New Product
Development
Business Director Supply Chain
Director Business Mfg Leader Finance
Leader New Product Development
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ESOP in Summary..

• Rigorous 5 step process with shared
  accountability
  cross-functionally
• Fact-based decision making
• Constructive debate is a must!
• Enables business leaders to become proactive vs
  reactive
• Implemented in 13 Dow business so far with
  dramatic results
• Over 100MM in value delivered to businesses and
  company

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