Balancing and decision-
Sales & Operations Planning (S&OP), and Integrated Business Planning (IBP), are both about balancing demand, supply and finance. It is about making cross-functional decisions and executing the decisions to keep this balance in line with company strategies and targets.
Supply chain decisions are not always aligned. So first of all, we recommend that you check whether you are making the right decisions in the right time horizon.
For example, you should make decisions concerning more production capacity (e.g. a new plant) in the strategic/S&OP horizon, whereas in-/decreasing manning belongs to the operational horizon.
Here, we use an example from holiday planning to show the different planning levels at different time horizons.
When we plan for a holiday, we make different decisions at different time horizons – we make it simple and easy for ourselves to make the right decisions at the right times.
The holiday time is identified and the oliday is booked
We start planning what to do on the holiday and perhaps prepare the packing list
We pack the suitcase and buy small groceries
If you want to design the right scenarios, risk mitigations and contingency plans, you need to understand what business goals S&OP/IBP is supporting. It can for example be growth, profitability, responsiveness, CSR and net working capital reduction.Having the business goals in mind, you can build scenarios in the following way:
You must prepare and present recommendations in a simple executive overview – but also, you must remember to include all the background analyses available for those who need more information.
You must present your recommendations as decision proposals with a KPI overview and profit analyses. And you need to make the consequences and outcomes of the different decisions clear.
You review the consensus S&OP/IBP plan that has been generated in the prior steps. This is the final final step in the balancing and decision process. Now is the time and place, if you have to resolve any outstanding demand or supply risks and opportunities that require executive decisions
The outcome of this step is executive acceptance and approval for the recommended decision proposals. When you have achieved consensus, you communicate the plan and execute on it, and then the cycle begins again.
You use scenario planning to be one step ahead of coming events; risks as well as opportunities. It enables you to create strong and reliable decision proposals to counter and/or exploit upcoming events, which will support the overall strategy of the company. It is important to highlight that you can also use scenario planning to evaluate future opportunities in order to secure successful exploitation.
Scenario planning is a great discipline for supporting the dialogue and decision-making at S&OP/IBP meetings in complex and volatile environments. Such environments are characterised by emerging markets and long supply lead times. Using scenario planning, you can provide a structured approach to identify drivers, scenarios and possible outcomes.
You can read our article on scenario planning in Sales & Operations Planning here
You need to be capable of making decisions to create an effect with your S&OP and IBP processes. The only decisions you should escalate to the executive meeting are decisions you could not solve during the demand or supply meetings.
Generally, there are two types of scenarios for the executive meeting:
Gap closing activities are typically situations where demand exceeds supply. But it can also be the other way around.
An example could be a growth scenario where we need to evaluate different options to meet the future demand.
New opportunities are typically related to the possibility of pursuing new markets or customers. It could be tenders, geographical expansions etc.
However, in certain industries with constrained supply situations, it might be the opposite way around, where production has the opportunity to e.g. expand with new production capacity.
Integrated Business Planning
Upgrade your sales & operations planning to link operations, create transparency and drive greater profitability.
The benefit map
The benefit map creates ownership of the realisation of benefits, and it moves the focus away from deliverables and towards behaviour as the driver of benefits realisation.
Implement Consulting Group