| Implemented properly, the Sales and Operations | | | | on the business issues and opportunities, looking |
| Planning (or Integrated Business Planning) process has | | | | forward across the entire 24-month planning horizon |
| the potential to alter a company's operational and | | | | while keeping the best interest of the whole |
| financial performance drastically, helping executives to | | | | company in mind. It comes from the chief executive's |
| achieve goals and push strategies. Discover what | | | | well-articulated and frequently reinforced expectation |
| having a strong executive management team in place | | | | that truth will drive the process, and misbehavior will |
| can do for S&OP initiatives at every level of the | | | | not be tolerated. Examples of misbehaviors that are |
| business. What is the difference between a Sales and | | | | destructive to the objectives of the S&OP/IBP |
| Operations Planning (S&OP) process that makes a | | | | process include disguising the truth (hedging and |
| modest difference in a company's operational and | | | | "sandbagging" that is not communicated, for |
| financial performance and an S&OP process that, | | | | example) and making decisions outside the S&OP |
| year after year, enables a company to achieve its | | | | process without the leadership team's participation. |
| operational, business, and strategic goals? | | | | Trust and openness also become key organizational |
| You don't have to look beyond the senior leadership | | | | values when performance measures focus on the |
| team for the answer. | | | | achievement of the strategy and performance |
| Sales and Operations Planning (also known as | | | | improvement. If a functional group is penalized for |
| Integrated Business Planning) is an executive | | | | doing what is best for the company, teamwork |
| management process for running the business. The | | | | dissolves. This can occur, for example, when a |
| focus of S&OP in the 1980s and 1990s (and still | | | | commercial group's demand plan is reduced because |
| today for some companies) was a management | | | | there is insufficient capacity to fulfill demand, but the |
| process for aligning demand and supply at the | | | | commercial group's revenue goal upon which |
| aggregate level. | | | | commissions are based is not likewise adjusted. |
| Today, Sales and Operations Planning has evolved | | | | Reducing the Chaos |
| into Integrated Business Planning where all company | | | | With strong leadership, team-based management |
| plans - product, demand, supply, strategic initiatives | | | | becomes the unconscious way in which the business |
| and resulting financials - are synchronized and aligned | | | | is managed and operated. One client company |
| at the aggregate level each month. IBP has also | | | | achieved this breakthrough when, at the conclusion |
| evolved into a process for identifying gaps between | | | | of the management business review, one of the |
| future projections and the company's business and | | | | senior leaders commented, "Do you realize this is the |
| strategic objectives - providing direction and making | | | | first meeting where we weren't defending ourselves |
| decisions on how to most effectively close those | | | | and blaming each other, and we really focused on |
| gaps. | | | | making decisions for the business?" |
| With Integrated Business Planning, the senior | | | | The leader of another client company, which had |
| leadership team has a process where every month | | | | been managing the business using Sales and |
| they understand not only performance to date, but | | | | Operations Planning for a little over one year, called |
| also the future state of the business over at least a | | | | with this report: He overheard a middle manager who |
| 24-month, rolling, planning horizon. They also have a | | | | was new to the company ask: "Why do we do |
| process for ensuring that the appropriate actions and | | | | S&OP?" His compatriot answered: "I don't know for |
| activities are undertaken to achieve the company's | | | | sure, but I don't want to go back to the way we |
| business and strategic objectives. The enterprise | | | | used to do things. It was chaotic." An experienced |
| performance management element of Integrated | | | | practitioner of S&OP made the point that "even if |
| Business Planning provides the platform for monitoring | | | | the market place, our customers, and the external |
| execution of the company's operational and business | | | | environment as a whole are chaotic, we don't have |
| strategies and goals. | | | | to have management chaos in our company. We |
| The above simply cannot happen without senior | | | | have chosen to manage the dynamics of the |
| leadership involvement in the process. Involvement | | | | business using a regular and routine management |
| means just that - active, high-profile involvement, and | | | | approach where we anticipate the changing dynamics |
| not just lip service support. | | | | in sufficient time to prevent needing to make last |
| The S&OP/IBP Process | | | | minute, costly responses." |
| Each step of the Sales and Operations Planning | | | | Another client company's leaders - from CEO, to |
| Integrated Business Planning process (product | | | | COO, to the vice presidents of business units - state |
| management review, demand review, supply review, | | | | that Sales and Operations Planning has transformed |
| financial appraisal, and management business review) | | | | their business. Not only have they made several |
| has a senior leadership team owner, and ownership | | | | timely acquisitions, they have assimilated those |
| and involvement is not delegated. The management | | | | acquisitions very well. Plus, during the recession, their |
| business review is the president/CEO/COO's meeting, | | | | financial performance has exceeded their competitors |
| and the participants are the senior leadership team | | | | by quite a large margin. |
| representing product management, sales and | | | | This statement of the impact that S&OP has had on |
| marketing, supply management, strategy and finance. | | | | the company is in sharp contrast to inquiries we get |
| Additionally, key functional support leaders of quality, | | | | from clients that struggle with S&OP. For those |
| human resources, public relations etc. are represented. | | | | struggling companies, usually, leadership involvement is |
| With the senior leadership team's active involvement | | | | lacking. Seeing S&OP as only a supply chain initiative, |
| in S&OP/IBP, the leadership culture changes. Instead | | | | these companies' leaders have set too low of an |
| of thinking in terms of what is best from a functional | | | | ambition for the process. |
| perspective, the leadership team provides direction | | | | Independent research from firms like Aberdeen, |
| and makes decisions based on what is best for the | | | | Ventana Research, and AMR Research have shown |
| company overall. What evolves is the development | | | | that companies that do S&OP/IBP well are more |
| of common agendas and goals. | | | | successful than companies that do not. One finding |
| When Sales and Operations Planning/Integrated | | | | by Ventana Research showed that in companies that |
| Business Planning is first implemented, a leadership | | | | reported the highest gains in customer satisfaction, |
| culture that emphasizes teamwork in working toward | | | | the Sales and Operations Planning process was |
| common goals and agendas typically does not exist. | | | | sponsored by the CEO or CFO. This finding supports |
| That is because trust, openness, and honesty often | | | | the authors' experience in leading and guiding |
| have not yet been established. | | | | companies to implement the Sales & Operations |
| With strong chief executive leadership in the S&OP | | | | Planning/Integrated Business Planning process the |
| IBP process, trust will evolve. It comes from focusing | | | | right way. |