This article is taken from the book, Practical Guide to Sales & Operations Planning (S&OP/IBP). It’s currently available at a special introductory price. Get a copy here before the price increases.

Collaboration and involvement from people outside of one’s own role become very important in the complex dance of business operations, especially when it comes to Sales and Operations Planning (S&OP).

Imagine that a carefully thought-out forecast fails because important details about a last-minute marketing strategy are not shared, or a new product fails to launch because they did not have a piece of information from sourcing. These mistakes often happen when people and groups work alone, and it shows how important it is to have a structured way of coordinating across functions.

“Real-life problems often make it hard to work together smoothly”

Even though every company always says it is important to break down functional silos and build up communication, real-life problems often make it hard to work together smoothly. This realization shows how important it is for companies to have a structured way of achieving this cross-functional alignment.

When functions work together, each one affects the other, kind of like seeing all the puzzles put together instead of just a piece. This synergy could show up as a huge sale, less product that does not sell quickly, or the ability to find new synergies to cut costs. Without good communication and participation, a process that starts without involving other departments can end up putting extra work on them, which can lead to extra costs and missed chances.

Effective collaboration and cross-functional involvement are key to the success of mature Sales and Operations Planning (S&OP) processes. A mature process creates a unified way for the company to communicate better and reach its goals.

What Exactly Does Strong Teamwork Look Like?

• S&OP Goals Are in Line with Each Other: To work together well, everyone needs to be on the same page about the S&OP goals. To be committed to a cross-functional method, the functions that are taking part must give up old ways of doing things and trust that the S&OP process will bring benefits. This connection makes sure that everyone is working toward the same goal, which brings together and makes sense of different business functions.
• Supporting Mindsets and Behaviors: Adopting mindsets and behaviors that fully support the stated process is a key trait for high-performing cross-functional S&OP teams. To do this, silos need to be broken down, and a setting needs to be created where people from, say, the Commercial and Supply Chain or Finance see themselves as equal partners. Adopting a helpful attitude and working together makes S&OP stronger, letting ideas and suggestions from different departments fit together easily.
• Active Participation: Active participation is a must in an S&OP process that works. True alignment makes sure that all activities are focused on the company’s main goals and are coordinated between different functional areas. If all stakeholders are not involved, there could be differences in the amount, mix, location, or timing of products, which could hurt total performance.

Collaboration in mature S&OP processes is more than just working together; it includes having the same goals and having an organizational mindset that values working together to achieve those goals. Businesses can get the most out of S&OP by making sure everyone is on the same page, encouraging helpful thoughts and actions, and encouraging active involvement. This will increase efficiency, flexibility, and long-term success.

How do I Get Functions to Start Working Together?

To get people from different departments to work together and be involved in Sales and Operations Planning (S&OP), you need a plan that considers differences in culture, skills, and communication. To help foster this collaboration, here are seven steps you can take:

• Cultural Brokers and Change Catalysts: Recognize people in the company who are great at making connections between areas. These “cultural brokers” or “change catalysts” can help teams work together better by working with people from different backgrounds, stepping into different roles, and making links.
• Upskill for Cross-Silo Success: Give functional leaders on diverse teams training and mentoring programs to help them get better at their jobs. Training can teach people how to ask open-ended, fair questions, think about other points of view, and see things in a bigger picture.
• Encourage Communication to Build Trust: To build trust among cross-functional teams, encourage open communication. Promoting open communication helps team members who do not know each other well get over trust problems that come up because they do not know each other well.
• Set Up More Structure: Even though it may seem like speed is important, structure is actually very important for cross-functional teams to work well. Set clear jobs, goals, and responsibilities to make it possible for people to work together. Using a structured method helps S&OP become more mature.
• Use Meaningful Metrics: Connect the changing performance of your team to the goals and key performance indicators (KPIs) of your company. Set clear, cross-functional goals and measurements that are in line with the organization’s objectives. This makes sure that the team’s work helps the project succeed as a whole.
• Acknowledge and Reward Success: Use KPIs to track and acknowledge growth and success. Leaders should praise individuals or groups for doing a great job, and stress how important cross-functional collaboration is, and how it can help the company.
• Choose the Right Technology: Spend money on teamwork and communication tools that make it easy for teams from different departments to work together. To improve communication and teamwork, use tools like screen sharing, video chat, and process management apps.

By following these steps, companies can create a setting where people can work together in the S&OP process, which will lead to better communication, trust, and organized teamwork between different departments. This method helps make S&OP more mature and increases the success of the company.

Conclusion

In S&OP, cross-functional collaboration is not just about sharing wins; it is a strategic must to see how actions affect the whole picture. It requires removing barriers to create an environment where departments are not only contributors but also active participants in the organization’s success.

IBF’s new book Practical Guide to Sales & Operations Planning is a fantastic resource to learn best practices in S&OP and IBP from world-leading planning experts. You’ll learn how to start an S&OP/IBP process, progress it along the maturity curve, and use it to drive effective decision making that has a direct impact on KPIs like inventory turns, forecast accuracy, cash flow, customer service and more

This article is taken from the book, Practical Guide to Sales & Operations Planning (S&OP/IBP). It’s currently available at a special introductory price. Get a copy here before the price increases.

As companies advance in their S&OP journey, the depth and breadth of planning expand, necessitating greater involvement from finance professionals. Finance expertise becomes indispensable as it adds nuanced insights beyond mere numerical analysis to the S&OP framework.

This integration fortifies businesses, enhancing their adaptability in today’s dynamic market landscape. Integrating finance into S&OP transforms the process from an ancillary function to a pivotal component of organizational strategy. Managers gain visibility into real costs, steering decisions towards tangible outcomes rather than theoretical conjectures. From procurement to production scheduling and marketing strategies, finance-informed decisions align with overarching business objectives and financial plans.

“Finance transforms S&OP from an ancillary function to a pivotal component of organizational strategy”

Excluding finance from S&OP, planning is limited to input-output dynamics, overlooking crucial aspects of business operations. Finance’s involvement is essential for a holistic understanding of the business ecosystem, as it ensures that decisions are based on financial realities. Collaboration between S&OP and finance bridges gaps in comprehending interdepartmental synergies, facilitating informed decision-making.

A synchronized approach that seamlessly integrates forward-looking sales and operations plans with financial considerations is essential for effective budgeting. This alignment ensures that planning decisions directly impact financial outcomes, fostering organizational coherence and fiscal responsibility. By fostering collaboration between finance and S&OP stakeholders, businesses cultivate a comprehensive understanding of operations, enabling informed cost management decisions essential for sustained growth and profitability.

Benefits of Integration

It’s important to know how to talk about business in the Executive S&OP step by turning plans for numbers into plans for money. Executives decide what to do based on how the results will affect the organization’s health and its bottom line. They talk about EBITDA, P&L, and cash flow, not estimate error, units, and capacity. When Finance and S&OP work together, you can talk to leaders in their own language and make sure that everyone has a better understanding of the plans.

1.Alignment with Financial Goals: Finance being a part of the S&OP process makes sure that decisions made by the business are in line with its overall financial goals. When financial factors are taken into account in strategic planning, the S&OP process becomes a unified force that drives the company’s goals.

“Finance’s role in S&OP gives it a strategic view”

2. Strategic View: Finance’s role in S&OP gives it a strategic view by consistently predicting key business drivers, using predictive analytics, and incorporating up-to-date sales data. By adding financial information, the organization’s strategic path, risk assessment, and upcoming opportunities can be shown more accurately.

3. Collaboration: S&OP is naturally a process that involves people from different departments, and adding Finance breaks down silos and encourages people to work together. Different departments can make choices that are in line with bigger financial goals if they work together. Finance helps make it easier for people from different departments to work together and takes budget limits into account when making long-term plans.

4. Flexibility: A flexible financial plan is important in today’s fast-paced business world where market conditions, customer tastes, and world events are always changing. Adding Finance to S&OP, which focuses on ongoing planning and rolling forecasts, helps businesses respond quickly to changing conditions by making sure that monthly predictions are in line with financial plans.

“When Finance is added to S&OP, it makes the whole company take the same approach”

5. Unity Across the Enterprise: When Finance is added to the S&OP process, it makes the whole company take the same approach. By making a monthly Profit and Loss (P&L) and rolling forecast, businesses can better understand the factors and drivers that affect different areas. This breaks down barriers and promotes a more unified work culture. Long-term resilience in the face of uncertainty is helped by this unified method.

How to Integrate Finance Into S&OP

• Monetizing S&OP Plans: The first step towards integration is to monetize S&OP plans. This involves translating plans into financial terms and ensuring that all participating S&OP functional leaders have monetized plans to run their respective areas effectively.
• Alignment of S&OP Design with Financial Management: It is very important that the S&OP design is in line with how the business handles and reports its finances. This alignment ensures the easy addition of financial factors to the S&OP structure.
• Speaking the Same Language: The S&OP structure needs to be able to communicate with the finance team. We must change S&OP measures from volumes to values, inventory to working capital, and resource use to return on assets in order to achieve this.
• Finance-Led Variance Discussions: Finance can be very helpful when it comes to leading budget difference conversations, asking important questions, and speaking up when needed. This collaborative approach ensures the consideration of financial concerns during decision-making.
• Joint Objectives for Financial and Operational Departments: Setting shared goals for the finance and operations teams gives them a direction to follow, makes their goals more aligned, and encourages them to work together.

Conclusion

Including Finance in the S&OP process is not only the right thing to do; it is also a must for businesses that want to do well in today’s business world. For organizations striving for excellence, transitioning from understanding how to get finance in S&OP to effectively leveraging this partnership for strategic success is critical. By harnessing the synergies between finance and S&OP, organizations can achieve greater agility, profitability, and long-term resilience. This is an important step on the S&OP maturity journey.

BF’s new book Practical Guide to Sales & Operations Planning is a fantastic resource to learn best practices in S&OP and IBP from world-leading planning experts. You’ll learn how to start an S&OP/IBP process, progress it along the maturity curve, and use it to drive effective decision making that has a direct impact on KPIs like inventory turns, forecast accuracy, cash flow, customer service and more

This article is taken from the book, Practical Guide to Sales & Operations Planning (S&OP/IBP). It’s currently available at a special introductory price. Get a copy here before the price increases.

Sales and Operations Planning (S&OP) stands as a cornerstone in the realm of Supply Chain Planning, serving as the nerve center that aligns diverse planning activities within an organization. The true potential of S&OP, however, blossoms in a mature implementation, offering a myriad of benefits that significantly elevate organizational performance.

Here are the top ten advantages intrinsic to a mature S&OP process, providing compelling reasons for any organization to embrace this transformative approach.

10) Builds Collaboration: A mature S&OP process acts as a catalyst, fostering cross-functional collaboration by dismantling silos and overcoming functional barriers. The convergence of stakeholders from sales, operations, finance, and other areas not only breaks down informational silos but also establishes a foundation for increased trust and accountability.

9) Builds Consensus: Achieving a unified vision becomes a reality with S&OP, as it ensures everyone operates from the same plan, aligning day-to-day operations with overarching business strategies. This unity reduces errors, facilitates plan reconciliation, and enhances adaptability when faced with unforeseen challenges.

8) Becomes More Agile: Contrary to the misconception that S&OP hampers agility, a mature process promotes collaboration and consensus as keystones to agility. With streamlined planning, organizations are better positioned to execute swiftly, plan buffers effectively, and strategize mitigation strategies with coherence.

7) Improved Visibility and Transparency: A mature S&OP process offers a comprehensive view of the entire business landscape, providing a forum for open discussions, conflict resolution, and informed decision-making. This enhanced visibility minimizes uncertainties and sets the stage for transparent communication across all levels of the organization.

6) Forecast and Plan Improvement: Beyond mere forecasting, a mature S&OP process elevates all planning facets, minimizing bias and incorporating diverse insights. The outcome is a set of plans that are not only more accurate but also more relevant and meaningful to all functions within the organization.

5) Resource Optimization: At its core, a mature S&OP process becomes a cost-saving engine for the company. By intelligently streamlining operations and optimizing resources, organizations enhance efficiency, eliminate bottlenecks, and fortify their supply chain, production, and logistics processes.

4) Better Customer Service: Beyond on-time, in-full (OTIF) metrics, a mature S&OP process contributes to top-line growth and revenue improvement. It enables organizations to understand customer demand intricately, leading to optimized inventory levels, timely product delivery, and enhanced customer satisfaction and loyalty.

3) Enhance Decision-Making: One of the hallmarks of a mature S&OP process is its ability to enhance decision-making. By providing a holistic view of the business, S&OP empowers organizations to assess different scenarios, evaluate risks, and develop informed contingency plans that align with their strategic objectives.

2) Higher Profitability: The ultimate goal for most organizations is maximizing shareholder value, and a mature S&OP process is the key to achieving this. It contributes to increased operating margins, enhanced capital efficiency, and sustained revenue growth, making it a cornerstone for higher profitability.

1) Competitive Advantage: In today’s dynamic business landscape, S&OP is not just a choice; it is a competitive imperative. Organizations that embrace a mature S&OP process gain a significant advantage by being more agile, responsive to market changes, and differentiated from their competitors. It is not merely a process; it’s a strategic advantage that propels companies toward long-term success.

Clearly, Sales and Operations Planning (S&OP) is not just a functional process but a strategic lever for organizational excellence. A mature S&OP process weaves collaboration, transparency, and agility into the fabric of an organization, providing a robust framework for sustained growth and competitive differentiation. If you have not started the S&OP journey, you are not just falling behind; you are falling behind a competition (that has most likely already read this book and has already embraced the transformative power of S&OP).

IBF’s new book Practical Guide to Sales & Operations Planning is a fantastic resource to learn best practices in S&OP and IBP from world-leading planning experts. You’ll learn how to start an S&OP/IBP process, progress it along the maturity curve, and use it to drive effective decision making that has a direct impact on KPIs like inventory turns, forecast accuracy, cash flow, customer service and more