What is the difference between a Sales and
Operations Planning (S&OP) process that makes a modest
difference in a company's operational and financial performance and an
S&OP process that, year after year, enables a company to
achieve its operational, business, and strategic goals?
You don't have to look beyond the senior
leadership team for the answer.
Sales and Operations Planning (also known as
Integrated Business Planning) is an executive management process for
running the business. The focus of S&OP in the 1980s and 1990s
(and still today for some companies) was a management process for
aligning demand and supply at the aggregate level.
Today, Sales and Operations Planning has evolved
into Integrated Business Planning where all company plans - product,
demand, supply, strategic initiatives and resulting financials - are
synchronized and aligned at the aggregate level each month. IBP has
also evolved into a process for identifying gaps between future
projections and the company's business and strategic objectives -
providing direction and making decisions on how to most effectively
close those gaps.
With Integrated Business Planning, the senior
leadership team has a process where every month they understand not
only performance to date, but also the future state of the business
over at least a 24-month, rolling, planning horizon. They also have a
process for ensuring that the appropriate actions and activities are
undertaken to achieve the company's business and strategic objectives.
The enterprise performance management element of Integrated Business
Planning provides the platform for monitoring execution of the
company's operational and business strategies and goals.
The above simply cannot happen without senior
leadership involvement in the process. Involvement means just that -
active, high-profile involvement, and not just lip service support.
The S&OP/IBP Process
Each step of the Sales and Operations
Planning/Integrated Business Planning process (product management
review, demand review, supply review, financial appraisal, and
management business review) has a senior leadership team owner, and
ownership and involvement is not delegated. The management business
review is the president/CEO/COO's meeting, and the participants are the
senior leadership team representing product management, sales and
marketing, supply management, strategy and finance. Additionally, key
functional support leaders of quality, human resources, public
relations etc. are represented.
With the senior leadership team's active
involvement in S&OP/IBP, the leadership culture changes.
Instead of thinking in terms of what is best from a functional
perspective, the leadership team provides direction and makes decisions
based on what is best for the company overall. What evolves is the
development of common agendas and goals.
When Sales and Operations Planning/Integrated
Business Planning is first implemented, a leadership culture that
emphasizes teamwork in working toward common goals and agendas
typically does not exist. That is because trust, openness, and honesty
often have not yet been established.
With strong chief executive leadership in the
S&OP/IBP process, trust will evolve. It comes from focusing on
the business issues and opportunities, looking
forward across the entire 24-month planning horizon while keeping the
best interest of the whole company in mind. It comes from the chief
executive's well-articulated and frequently reinforced expectation that
truth will drive the process, and misbehavior will not be tolerated.
Examples of misbehaviors that are destructive to the objectives of the
S&OP/IBP process include disguising the truth (hedging and
"sandbagging" that is not communicated, for example) and making
decisions outside the S&OP process without the leadership
team's participation.
Trust and openness also become key organizational
values when performance measures focus on the achievement of the
strategy and performance improvement. If a functional group is
penalized for doing what is best for the company, teamwork dissolves.
This can occur, for example, when a commercial group's demand plan is
reduced because there is insufficient capacity to fulfill demand, but
the commercial group's revenue goal upon which commissions are based is
not likewise adjusted.
Reducing the Chaos
With strong leadership, team-based management
becomes the unconscious way in which the business is managed and
operated. One client company achieved this breakthrough when, at the
conclusion of the management business review, one of the senior leaders
commented, "Do you realize this is the first meeting where we weren't
defending ourselves and blaming each other, and we really focused on
making decisions for the business?"
The leader of another client company, which had
been managing the business using Sales and Operations Planning for a
little over one year, called with this report: He overheard a middle
manager who was new to the company ask: "Why do we do S&OP?"
His compatriot answered: "I don't know for sure, but I don't want to go
back to the way we used to do things. It was chaotic." An experienced
practitioner of S&OP made the point that "even if the market
place, our customers, and the external environment as a whole are
chaotic, we don't have to have management chaos in our company. We have
chosen to manage the dynamics of the business using a regular and
routine management approach where we anticipate the changing dynamics
in sufficient time to prevent needing to make last minute, costly
responses."
Another client company's leaders - from CEO, to
COO, to the vice presidents of business units - state that Sales and
Operations Planning has transformed their business. Not only have they
made several timely acquisitions, they have assimilated those
acquisitions very well. Plus, during the recession, their financial
performance has exceeded their competitors by quite a large margin.
This statement of the impact that S&OP has
had on the company is in sharp contrast to inquiries we get from
clients that struggle with S&OP. For those struggling
companies, usually, leadership involvement is lacking. Seeing
S&OP as only a supply chain initiative, these companies'
leaders have set too low of an ambition for the process.
Independent research from firms like Aberdeen,
Ventana Research, and AMR Research have shown that companies that do
S&OP/IBP well are more successful than companies that do not.
One finding by Ventana Research showed that in companies that reported
the highest gains in customer satisfaction, the Sales and Operations
Planning process was sponsored by the CEO or CFO. This finding supports
the authors' experience in leading and guiding companies to implement
the Sales & Operations Planning/Integrated Business Planning
process the right way.
Article Source: http://www.articlesbase.com/
leadership-articles/the-role-of-leadership-in-sales-and-
operations-planningintegrated-business-planning-2214095.html
About the Author
Colleen "Coco" Crum is a managing principal and
member of the board of directors for Oliver Wight Americas, a global integrated
business planning firm that provides education and training
on sales and operations planning. Since joining the organization in
1995, Crum has contributed to advancing the methodology of integrating
demand and supply processes successfully both inside a business
enterprise as well as throughout the supply chain. She is the co-author
of three books: Enterprise Sales and Operations Planning:
Synchronizing Demand, Supply and Resources for Peak Performance;
Supply Chain Collaboration: How to Implement CPFR
and Other Best Collaborative Practices; and Demand
Management Best Practices: Process, Principles and Collaboration.
To learn more, please visit www.oliverwight-americas.
com.
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