Sales & Operations Planning (S&OP) is crucial to optimize overall business margins and customer service levels. Sales & Operations Planning requires alignment between supply planning, production planning, inventory planning and demand planning. Establishing alignment between the different planning teams is key to the creation of an integrated business plan, which supports in achieving the business goals. Moreover, the right integrated business plan approach encompasses what-if analyses which support our clients in making the right decisions.
Executives and S&OP
Every executive has a stake in Sales & Operations Planning
- The CEO because of the responsibility to develop the most profitable plan, to drive growth during the launch of pipeline products, to become a more dynamic company, to explicitly balance short and long term, to improve business analyses, and to reduce risks
- The CFO due to the increasing speed of the cash conversion cycle, the required reduction of obsolescence and warranties and smaller margins
- The COO uses S&OP as a fact-based model to provide actors with opposite goals and subjective opinions with information related to fill rates and production efficiency. The goal is simply to produce what is being asked by the customer
Integrated business planning harmonizes conflicting goals
Integrated business planning harmonizes conflicting goals between the Budget, Sales, Manufacturing and the actual Demand. These functions are involved in the following way:
- Finance - Making the financial budget. This has a top down focus, enables control and predictability Forecast definition: Budget
- Sales - Maximizing revenue and market share, enables guaranteed product availability Forecast definition: Sales Plan
- Operations - Factory optimization, improve costs and minimize demand uncertainty Forecast definition: Manufacturing Plan
- Supply chain - A feasible plan, bottom up focus, wants to minimize risk and disruption Forecast definition: Demand forecast
Pitfalls when implementing Integrated business planning include:
- Spending more energy on IT than the process and the creation of alignment
- Spending more energy on the content than on people
- The desire to directly include margin optimization
- The desire to jump from a basic level of S&OP to the highest automated S&OP level too quickly
- The decline of leadership level involvement after the ramp up of the implementation
Integrated business planning equals change management
Many people like working in their comfort zone in their own silos, without intervention of others. Integrated business planning requires perseverance and continued focus of management. A solid integrated business plan requires de-siloing of an organization.
Sales & Operations Planning & BCI advice
BCI supports clients in establishing an effective target operating model for the S&OP organization. To establish the right operating model, the current planning organization (i.e. resources and structures), performance (i.e. planning biases), future business requirements and IT & tools are investigated.
BCI can help you answering questions like:
- How to create engagement in Sales & Operations Planning?
- Which processes and responsibilities are required in the Sales & Operations Planning cycle? How mature are our processes, tools and organizational set-up? What can we learn from others or best in class companies?
- How to implement the new or revised integrated business planning approach? Which data, tools and metrics do we need? When are we ready for a full roll-out?
- What are our requirements for Sales & Operations Planning IT solutions? Which software solution fits our needs best?
BCI can also assist in developing the toolkit, or assist in regular review Sales & Operations Planning meetings to answer questions like:
- Where to locate inventory best in the supply chain?
- What is the ideal product mix (how much of which SKU, where)?
- What is the optimal stock to service mix?
- How will the overall company margin develop across the scenarios at hand?
The BCI methodology creates:
- Willingness between different planning teams to work and align on one single integrated business plan throughout the company
- Achievement of targets, plan adherence improvements and forecasting skills
- S&OP efficiency improvements by selecting and implementing effective IT solutions