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More and more companies are turning to sales and operations planning (S&OP) to align different areas of a business around the same goals, while those already experienced in S&OP are shifting to a more advanced version of the process known as integrated business planning (IBP).
IBP has a greater emphasis on strategic planning and the dynamic testing and reshaping of strategy, says Mary Adamy, principal at Oliver Wight. "There is much more simulation and a use of advanced technology to support scenario planning and contingency planning based on market and economic factors," she says. "This points to more involvement by a company's senior leadership team."
Indeed, the level of involvement of senior leadership in IBP is one simple way to gauge the effectiveness of a company's process, Adamy says. "Are leaders using the process as the primary means by which they plan and execute the business? If someone suddenly said that the process would no longer be allowed, would these leaders jump up and protest because they know it is delivering value? The answer to these questions can give a good idea of the success of a program," she says.
Gaining "honest and real" management support is the first and biggest challenge to implementing S&OP and IBP, Adamy says. "This commitment is the basis for getting the resources needed to support an implementation effort and to operate the process," she says. "You simply can't move forward without it."
The results are worth the effort and investment, Adamy says, noting that a successful S&OP or IBP program should result in improvements in key metrics such as revenue, profitability, cost reduction and efficiency gains. "If the process results in improvements in these areas, it is fairly certain that the company is delivering value to both customers and shareholders," says Adamy.
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