Senior executives from some of the world’s best known manufacturing organisations who tuned in to the recent Oliver Wight webinar on Transitioning from S&OP to Integrated Business Planning (IBP), were candid about the shortcomings of their own business planning. A live poll revealed that the majority had processes that were neither integrated nor looked beyond the short term.
In the poll conducted during the hour long interactive broadcast, 58 per cent of delegates admitted their organisations spend the majority of their time focusing on the short term and in the majority of cases (59 per cent) the business leader does not lead the business planning process. Oliver Wight Partner, Liam Harrington who co-hosted the webinar with colleague Debbie Heaton, says that these two statistics have a direct relationship: "If the focus is on the short term, the executive will not be interested in the process, and if the executive is not involved, the focus can only be on the short term, because those who are involved, can only make short term decisions."
The poll also revealed that most organisations (84 per cent) still do not have a business planning process, which is fully integrated and that 87 per cent have less than the 24 month minimum horizon for Integrated Business Planning. Crucially, 81 per cent said their planning process did not allow the executive to identify performance gaps relative to the business plan. Harrington explains: "S&OP was originally conceived to provide the missing link between the commercial and supply side of the business. The intention was always to provide alignment but while many organisations have adopted the language of S&OP they have not always adopted the fundamental principles which have made it successful. To many it just means sales and operations getting together to do some planning, even though the potential of the process has developed way beyond that. Consequently, S&OP does not get the attention of the executive, whereas IBP resolves the issues the executive has of integrating and organising the people within their business.
Debbie Heaton says that while S&OP has become known principally for balancing supply and demand, IBP aligns, sales, marketing, R&D, operations, logistics, finance HR, even IT, so the entire organisation is operating to the same plan and moving together in the same direction. "The most recent development we are witnessing with IBP is significantly more collaboration at the front and back ends of the supply chain – customers, and customers’ customers, as well as suppliers – integrated into the process," she says.
A crucial differentiator between S&OP and IBP is the integration with product portfolio management, financials and the strategic plan. In this regard, the poll is also revealing: 74 per cent of the audience said that finance ran its own forecast and only 42 per cent said financials were integrated with the S&OP process. Product portfolio planning was only integrated in 46 per cent of cases and just 36 per cent believed their business process exposed the gaps between performance and the strategic plan.