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In many companies, financial planning remains separate from sales and operations planning processes. This disconnect can hamstring corporate performance and undermine BPM efforts.
SALES AND OPERATIONS planning (S&OP) has gotten the attention of business leaders, for obvious reasons. S&OP is a set of companywide planning and decision-making processes designed to balance the supply of products (or services) with the demand for them and to link day-to-day operations with business goals, operational planning, and financial planning. The purpose of S&OP is to enable senior management to reach consensus on a single operating plan that allocates critical resources optimally so that the company can hit its performance targets.
Considering the importance of S&OP, it's surprising that some companies which use sophisticated financial planning technologies still relegate sales and operations planning to spreadsheets. Even among companies that embrace S&OP technologies, many do so without first considering how they will connect the systems to their financial planning and budgeting process. This hastiness often leads to disconnected operational plans; missed goals and targets; and, overall, unsuccessful business performance management.
Effective corporate planning requires that companies use effective, integrated processes - and technologies - both for traditional business performance management (BPM) and for planning the operational activities and resource allocations that underlie the financial plans.
The Need Driving S&OP Software
The concept of S&OP was born as a manufacturing and supply chain process that focused only on balancing supply with demand. It has evolved since then, as companies have begun to see how it can help them address the complexities of globalization and the uncertainties created by changing customer orders, supply disruptions, product revisions, and new sales opportunities. Customer demand for quicker response, the ever-increasing variety of products on the market, and a need to deliver the hottest new items faster and faster all add to the allure of improving sales and operations planning processes.
Having a flexible method for allocating resources in today's constantly changing external environment is crucial, yet many executives find that their BPM processes and systems do not adequately support comprehensive operational planning. One common stopgap is to augment BPM systems with spreadsheets. But spreadsheets are notoriously problematic; because they are disconnected from the underlying data, users make assumptions based on data that may be...