Last week we hosted a webinar entitled “Integrated business planning: linking financial data to supply chain performance” (you can view the webinar on-demand here). The webinar featured presentations from Nari Viswanathan, vice president and principal analyst, Aberdeen Group and Christian Verstraete, chief technology officer worldwide manufacturing & distribution industries, Hewlett-Packard.
The webinar was attended by a wide cross-section of senior managers and executives in supply chain management roles. Attendees were from Europe, Asia and North America and included representation from aerospace & defense, automotive, chemical, consumer product, pharmaceutical & healthcare, high-tech, industrial and retail companies.
During the event, we polled the attendees on a variety of topics, and this is what we learned:
What role does finance play in your Sales & Operations Planning (S&OP) process?
- Finance is not involved: 19%
- Finance looks over the S&OP outcomes: 30%
- Finance approves the S&OP plans: 18%
- Finance is involved throughout the process: 28%
- Finance runs the S&OP process: 4%
Given the topic of the webinar, what is interesting in these responses is that Finance is 5 times more likely to have no involvement in the S&OP process than they do in running the S&OP process. More precisely, in only a third of the companies is Finance integral to the S&OP process. In roughly the same number of companies, Finance has a cursory role in overlooking the outcomes, but is not an active participant in the S&OP process. We would suggest that IBP requires a greater involvement on the part of Finance moving from oversight to actively guiding the process.
How frequently do you run your S&OP process?
- We don’t have a formal S&OP process: 9%
- Quarterly: 31%
- Monthly: 58%
- Weekly: 17%
It is great to see that a majority of companies have moved to a monthly S&OP process, with nearly 20% moving to weekly cycles. Without a doubt more frequent S&OP cycles will lead to greater agility and responsiveness, as well as better alignment between financial goals and supply chain performance.
What is the primary objective of your S&OP process?
- Demand/supply balancing: 50%
- Demand shaping/management: 12%
- Supply planning: 12%
- Product portfolio planning: 3%
- Profitability: 22%
While the figure of roughly 20% of the companies focusing on profitability appears to be quite low, my instinct, based upon experience in the field (in other words, ‘gut feel’), would indicate that this number has increased a lot over the past few years and clearly indicates a maturing of S&OP into IBP. After all one cannot measure profitability without linking financial data to supply chain performance. While it is not surprising that half the companies focus on demand/supply balancing, the origins of S&OP, what is surprising, given the constant pressure of product innovation, is the low response for product portfolio planning.
What is the biggest shortcoming of your current S&OP process?
- Access to required information in a single system: 29%
- Ability to create and evaluate scenarios quickly: 7%
- Ability to share and get input to scenarios from all participants quickly and effectively: 31%
- Ability to evaluate and compare scenarios using operational and financial metrics: 31%
- Knowing when you are no longer tracking to plan: 2%
In the current global, outsourced manufacturing environment, it is perhaps not surprising that two of the largest responses to the shortcomings of current S&OP processes were related to getting access to all the information (presumably in a timely manner and across organizational boundaries) and the ability to collaborate with all participants (presumably across organizational boundaries), clearly indicating the loss of control over operations that companies have experienced when outsourcing. However, the number that stands out is that of not being able to compare scenarios using operational and financial metrics, greatly reducing the quality of the decisions made during the S&OP process.