Archive for February, 2009
Why can’t I use our Financial Planning System for S&OP?
Why can’t my financial planning system be used for Sales & Operations Planning (S&OP)? This is a question I am asked regularly…
It is also the reason why various providers of financial planning solutions have recently partnered with Steelwedge.
The easiest answer is to speak with an organization that has tried to solve S&OP with a financial planning tool. In a few words, it doesn’t work!
But why? The fundamental answer to this question lies in the architectual foundation of an application such as Steelwedge. The functional answer is manifest in the out-of-the-box standard functionality offered by executive S&OP applications but not offered in financial planning applications. Highlighted below are three key of the elements to an S&OP system that don’t exist in budgeting, financial, business planning and consolidation applications:
1. High Performance Architecture – S&OP applications must have the capability to handle bottoms-up, top-down aggregation on-the-fly as part of the native planning process – this often translates into the need to perform complex calculations involving attribute and hierarchy-specific revenue to unit translations at a very detailed level and then rolling up the answer – the net result is the need for a performance-focused database architecture that can perform millions of details and billions of calculations in a matters of seconds.
Simply put, this is not something that high-level, dollar-based financial planning applications- even when supercharged – were ever designed to handle.
2. Support for complex algorithms to handle statistical forecasting, product mix management, attach-rate forecasting, independent-dependent demand management, and bill of materials (BOM) translation.
No financial planning system incorporates the kind of deep operational expertise required to support this requirement. While any application – with enough man-years of effort – can be programmed to do just about anything – it is simply not practical to replicate the knowledge, best practices, complex algorithms, standardized workflows, and off-the-shelf performance metrics built into any robust S&OP application.
3. A constraints-based supply planning engine that can perform rough cut capacity analysis, support supply-demand balancing, manage inventory netting, trade planning elastisticy analysis, and the operational optimization of S&OP supply-demand scenarios. This is core funtionality for Steelwedge but is not built into traditional financial planning solutions.
More questions? Comments? Please submit them below!
Why is Sales and Operations Planning Important?
If Sales and Operations Planning (S&OP) activities are not aligned and integrated, small problems quickly escalate into major challenges, which adversely impact corporate performance. As each part of an organization jockey’s to satisfy it’s own priorities, valuable time and resources are wasted, ultimately leading to poor customer service.
The consequences of poor sales & operations planning are substantial: excess inventory, short orders, overtime, inter-plant transfers, expediting, reduced order fulfillment, poor resource utilization. These issues impact the bottom-line, while fostering a reactive culture of undisciplined business processes.
Creating the proper alignment and balance between demand and supply is not easy. It requires a clear, focused process, based on industry best practices, that manages sales/marketing and operational issues in a thorough and efficient manner. Bringing together sales/marketing, operations, finance, and product management to facilitate joint objectives of the overall enterprise is what makes effective S&OP work.
This is why S&OP has become more important than ever!
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