Evolution of Sales & Operations Planning - From Production Planning to Integrated Decision Making

StrataBridge is a leading edge consulting firm helping organisations achieve sustainable growth in unpredictable circumstances. We focus on helping organisations align their business activity to strategy and understand the critical choices faced. Making the right choices enables our clients to achieve their business objectives. Our approach forces breakthrough thinking with the emphasis on helping organisations understand the impact of change on their organisation, culture and behaviours. Our approach is recognisable by our focus on transferring our knowledge to our clients and coaching them to achieve future success. Working alongside our clients we create practical action plans that enable them to make their vision a reality. Our strength lies in the abilities of our people; their breadth of experience, industry knowledge and progressive attitude. We add significant value to an organisation through the clarity of our thoughts and actions, seeking innovative solutions to improve business practices. Executive Summary This report traces the evolution of Sales & Operations Planning (S&OP) from its inception in the late 1980's, where the primary objective was a medium to long-term stable production plan, to the 21 st century, where several successful businesses are using it as a dynamic business performance management process tracking their progress against strategic direction. The foundational benefits of improved customer service and lower working capital are still important, but today more advanced companies have built on a robust operational foundation and now use the latest view from S&OP to generate the quarterly forecast for corporate headquarters. These businesses no longer have annual budgeting as a separate exercise. The report traces some learnings to be gained from the evolution of Sales & Operations Planning if these powerful benefits are to be realised in a wider context: I. The process should not be led by supply. At the very least supply chain and finance should jointly lead the process. Direction of the process must come from sales & marketing. Ideally senior business management should champion the process, but in large multinational companies this is not always possible. Senior management do not normally 'buy the process'; they 'buy the results'. II. Volume and value must be integrated in the medium to long-term view. Many businesses have separate processes for volume and financial forecasts. III. Obsession with extrapolation of detailed forecasts is unhealthy and will 'turn off' business management. 'Roughly right not precisely wrong' is the recommended approach. There must be an understanding of different ways …