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From S&OP to IBP: how to align operations and financial plans? Jeff Livingston, Sr Sales Executive
Pierre-Julien BUARD, Sr. Business Consultant
Wednesday, May 8, 2019
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The Essence of S&OP/IBP…
From S&OP to IBP: how to align operations and financial plans?
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“I want you to bring me the answers before I ask the questions”
Al Pacino as Willy Bank
in Ocean’s Thirteen
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“Sales & Operations Planning is a collaborative
decision-making process used to develop and align demand, supply, and financial plans in support of the overall business objectives and strategic goals “
S&OP History and Foundation
From S&OP to IBP: how to align operations and financial plans?
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Oliver
Wight Dick Ling Tom
Wallace
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5-Step S&OP Process
From S&OP to IBP: how to align operations and financial plans?
Data Gathering
& Review
Demand
Review
Pre-S&OP
Meeting
Executive
Meeting
Capacity
Review
Capacity
Review
Step 1 Step 2 Step 4 Step 5
Global Local
Step 3
Demand Review
Product Management
Review
Supply Review
Management
Business
Review
Source: Tom Wallace/Oliver Wight
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• S&OP – Mainly focused on: Balancing supply and demand (Units)
Resolving supply disruptions and shortages
• IBP – Evolved as focus shifted to: Strategic Management/Planning
Better understanding of external environment
Evolution of S&OP to IBP
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More robust financial integration
Inclusion of strategic plans, initiatives, and activities
More robust product & portfolio review
Improved simulation, modelling & scenarios
Improved operational risk visibility management
Gap identification, improved decision-making
Easy, effective translation – aggregated & detail
Improved trust across the entire management team
From S&OP to IBP: how to align operations and financial plans?
How is IBP different from S&OP ?
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• Incorporation of “Financial Planning”
Components of IBP
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• Evolving Role = Lead the organization in making the numbers
Coordinate the S&OP/IBP process
Assist with business decisions/impact
Defining KPI’s, targets & priorities
Run “what-If” analysis to support cross-functional business decisions.
Integrating Finance into S&OP/IBP
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• S&OP interacts with financial planning at four different points:
1. Monthly updates to financial plans
2. Development of annual plans and budgets
3. Capital investment decisions
4. Managing cash flow
(Dougherty & Grey):
Integrating Finance into S&OP/IBP
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• Typical Budget Cycle/Forecasting Challenges
Data in a common format
Chasing Sales/Ops people’s input
Struggling with Volume vs. Mix
Frustrated with people putting
in bad data and archaic systems
Finance Team – Hair on Fire!!
From S&OP to IBP: how to align operations and financial plans?
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• Leverage S&OP to Streamline the Budget Process:
• Define S&OP/IBP Categories
• Develop 12-14 month Forecast (Units/$’s)
• Minimizes budget prep crunch (Monthly S&OP)
• “Seed” next year’s Budget…it’s just another cycle
• Minimize the chaos/disruption of Budget preparation fire-drill
A Better Way to integrate Finance into S&OP/IBP
From S&OP to IBP: how to align operations and financial plans?
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Validation Balance
Agree on
Concerted Actions
Communicate
Operational Objectives
Preparation
Todays Best in Class Planning Process Foundations From S&OP to IBP: how to align operations and financial plans?
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Demand
Planning
Supply
Planning
Assess Business
Performance
Balance
Supply and
Demand
Estimate Financial
Impacts
Supply
Review
Demand
Review
Pre Exec
Meeting
P
1 Month
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From S&OP to IBP: how to align operations and financial plans?
Where are you on your S&OP/IBP journey
1.React
No formal S&OP
No technology
Excel/ERP
2.Anticipate
S&OP
Supply centric
Location level
Point solutions
3.Integrate
Market insight
Formal balancing
End to End
Revenue plan
4.Collaborate
Profitability
Scenarios
Stakeholders
Tight integration with SCP
5.Orchestrate
Network wide decisions
More strategic
What-if
Extended collaboration
Source : Gartner S&OP maturity stages
QAD Dynasys DSCP
S&OP Improvement One Step at a Time
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Financial Impact/Benefits of S&OP/IBP
From S&OP to IBP: how to align operations and financial plans?
• Typical Business Benefits of S&OP/IBP:
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USER
S
4,000+ IMPROVEMENTS IN FORECAST ACCURACY
10 to 40%
QAD DynaSys Demand & Supply Chain Planning
30% CUSTOMER SERVICE
INCREASE SUPPORT
ALWAYS ON THE
RETURN ON INVESTMENT
< 1 YEAR
10 to 50% INVENTORY
REDUCTION
UP
TO
LATEST VERSION 24x7x365
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Demonstration - Scenario #1
Business Challenge: Budget misalignment between finance and
operation
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Demonstration 1
Business challenges #1
• How QAD DynaSys can enable your company to compare your annual financial plan to the operational supply chain plan in a way that allows access to potential gaps between the two plans and decide which actions to take to close the gap and check feasibility and
Budget misalignment between finance and operation
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Active tile identifies
budget misalignment
Personalized homepage
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Drill into product family identify
family with misalignment
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Cannot reach the budget
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Notice of opportunity to
close the gap
Activity feed notes new entry
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Before After
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The additional demand
partially closes the gap
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Scenario #2 – Demonstration
Business challenge Execute S&OP decision
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Demonstration 2
Business challenge
• How QAD DynaSys can enable the execution of decision being made in the S&OP process in terms of aligning the aggregate level S&OP decision with the more granular operational/tactical planning environment
Execute S&OP decision
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Demonstration 2
What you will see
• Recently completed S&OP Meeting
• A series of decisions have been approved
• These are posted as Tasks in the activity feed
• A change in S&OP Demand at Family/Month will be translated to Operational Demand at Item/Week.
Translate S&OP decision into operation Demand
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Scenario #3 - Demonstration
Business challenge Collaboration between entities
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Demonstration 3
Business challenge
• How QAD DynaSys can enable a company to model, collaborate, and compare scenarios that facilitate getting S&OP planning decision in a global supply chain that operates in 3 regions (NA, EMEA, APAC) where relevant stakeholders of these regions needs to be involved.
Scenario to facilitate decision collaboration between entities
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Demonstration 3
What you will see
• A global supply chain plan aggregated with three regions NA, APAC, EMEA
• APAC region has a Sales Opportunity in week 47 but shortage of capacity
• NA region has unused capacity for this period
• Stakeholder collaboration
• A What-if Scenario is created for analysis and collaboration
• Sales & Manufacturing agree on possibility
• After profit analysis, Finance and Logistics agree on feasibility
• Everyone on the plan agrees to the initiative and it is approved
Translate S&OP decision into operation Demand
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APAC capacity shortages
APAC Stock Shortages
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Global & Collaborative, Scenario Simulations
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Thank You!
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