Sales and Operations Planning (S&OP) was originated by Oliver Wight more than twenty-five years ago, but even in its purest form S&OP has its shortcomings in today's business environment. Its most common application is demand and supply balancing, and whilst S&OP includes the capability for financial evaluation, it does not fully integrate the financial planning of the business.
The issue most companies have with sales and operations planning, is that they set too low an ambition, focusing simply on numbers (looking only at the short term) and assigning it as just a supply chain process, rather than integrating operational and financial planning. Many organisations fail to recognise the evolution and potential of S&OP, and mistakenly believing they already have an effective process in place, miss out on the benefits associated with doing it well. As knowledge and understanding has broadened and the scope of the process has increased, S&OP has evolved in to Integrated Business Planning (IBP).
What is the difference between S&OP and IBP?
- Greater financial integration
- Inclusion of strategic initiatives and activities
- Improved simulation and modelling
- Easier translation between detail and aggregate
- Improved decision-making
- Improved trust within the management team
IBP offers much greater scope than S&OP, but it does not end there. IBP is a constantly developing process; it is continually progressing and improving, and will continue to evolve long in to the future.
