All businesses rely on planning—from strategic to effective execution―to keep their business running smoothly. However, ensuring that all planning activities across the organization align to business objectives can be a challenge.
“You need to find an organizational design… of how those processes are going to run through complex companies, which can be global companies with regional setups with markets, with plants, or a network of plants and suppliers,” says Tanguy Caillet, SVP of Industry Solutions at o9 Solutions. “That is creating headaches… because, at the end of the day, the reality is on the process side.
On November 5, Tanguy Caillet led an aim10x roundtable in which participants shared their experiences which sparked great discussion around integrated business planning (IBP) and sales and operations planning (S&OP) processes. The conversation didn’t focus on the similarities and differences between IBP and S&OP, but instead delved into time horizons and why business decision-making based on those timelines is so significant.
Here are four great takeaways from the conversation:
S&OP/IBP planning horizons are at least 12 months
When asked about the length of their organization’s S&OP and IBP planning timelines, many roundtable participants said at least 12 months, with a few indicating 18-24 months long. In many cases, the S&OP/IBP planning process runs on a 12+ month timeline. There is potential to link this planning to the overall financial and P&L planning processes, allowing companies to have a snapshot of their IBP during the budget planning timeline. Ideally, companies should try to move towards a 24-month planning timeline because this can create a rolling forecast that incorporates business innovation into the mix. “My view is that IBP is the next attempt to stretch the horizon… for example, a customer had a 36-month horizon, so we have this strategy from 3-36 months. Then it’s a question about how you handle different granularity,” Tanguy says. “The key thing about IBP includes more sales, marketing, portfolio management, and finance, so you end up understanding more about the impact on your P&L and balance sheet.”
Integrate decision-making across timelines and hierarchies within an organization.
One of the ways that organizations can align and hopefully foster collaboration across departments is by recognizing that there is a need to have different plans that co-exist at different levels within the organization. But they need to align to the same truth and that technology and AI/ML solutions can help facilitate this. “I do think that from a change management perspective, many supply chains and also sales, marketing, and finance departments are slowly coming to the understanding that this is required to make better decisions,” says Tanguy.
Long-term planning is still essential in rapidly changing environments
An aim10x Innovators Network member brought up a great point that in a post-COVID world, many forecasting models are not as reliable due to the many constraints in the supply chain. So in today’s environment, should IBP planning still aim for an 18-24 month decision-making timeline, or should it become a more tactical model that uses a 3-6 month timeline. Through discussion, the merits of the traditional IBP timeline came to light. One of the most significant benefits is that it allows businesses to forecast growth accurately and allocate resources and investments towards reaching growth targets.
Companies that can pivot often have more advanced maturity of their digital supply chain
aim10x member, Dave Malenfant, mentioned that for many companies that he’s been in contact with, COVID-induced volatility had thrown lead times out the window. However, there’s a key component in companies that have been able to pivot effectively during uncertainty–they have a mature digital supply chain. These organizations didn’t focus on their lead times and instead prioritized customer service and determined the best approach for currently meeting customer demand. According to Dave, these companies are now looking at their bigger picture strategies around talent and processes.
“Companies that can pivot are now saying… ‘I have to rethink the way I’m going to approach my supply chain going forward,” Dave says. “I think we’re in a new world where S&OP and IBP are going to be redefined in this new age of supply chain management.”
Find out how the o9 Digital Brain Integrated planning, analytics, and data platform is transforming supply chain, revenue, and P&L decision-making across global enterprises. Visit www.o9solutions.com to learn more.