Companies whose doors have been open for longer than five minutes know teamwork is important. Every company has their own methods for maintaining communication and teamwork. Sales and operations planning, or S&OP, is a perfect example. S&OP is the process by which Sales and Operations work together to create one plan for a specific time frame. Sales provides projected revenue, and Operations provides their expected production. It's a game of supply and demand and predicting equilibrium. The end product is a forecast that aligns with executives’ strategic objectives and serves as a performance measurement tool.
The inventor of S&OP, Oliver Wight, tells us there's a new concept which improves upon even the most tightly run S&OP organization. The process is Integrated Business Planning, or IBP. According to many skeptics, IBP is simply a marketing gimmick to rebrand S&OP. However, Wight confirms Integrated Business Planning was not introduced to announce the invention of a new process, but rather to reveal the considerable changes to an existing one. The focus of S&OP has shifted toward gaining a better understanding of external factors and aligning all internal functions, not just Sales and Operations.
In the new world of IBP, Sales, Operations, Logistics, HR, Finance, Marketing, and Pricing are all working toward the same goals. Some examples of the ways IBP improves upon S&OP include:
IBP starts with implementing a process that works best for the company. If a company has been operating a run-of-the-mill S&OP process for twenty years, a change management plan to shift to IBP could be exactly what the company needs to take business to the next level. By making improvements to the traditional S&OP process, the company uses cross-functional data to make business decisions, set targets together, and commits to achieving the strategic plan.
A potential benefit of IBP over traditional S&OP is the ability to develop trust with suppliers and customers by including the strategic pricing equation in the planning process. IBP allows companies and, in turn, their suppliers and customers, to depend on reliable pricing and available to promise (ATP) numbers. Trust can only be established when people deliver to expectations. Pricing is a key player in IBP, as are ATP dates. Price is the translation between units and dollars enabling a common language.
Still not sure about the difference between traditional S&OP and IBP? It would not be surprising if the term IBP faded away and the term S&OP remained, but regardless, the concepts of IBP are the new gold standard. Whether a company has employed traditional S&OP processes for decades or is starting from scratch, it's important to apply the latest model. Why settle for a thing of the past when the future is much brighter?
Companies investing in IBP will notice a behavioral shift. For potentially the first time, the entire company will be moving toward the same set of strategic objectives. Ultimately the company will be able to provide a higher level of customer service, improve lead times, increase profit, and enjoy a positive impact on the bottom line.
Trenegy has years of experience helping companies to achieve their goals through integrated business planning. Please contact us at info@trenegy.com for more information.
