I’m going to reframe from a lengthy affirmation of how your S&OP process is rocking; The effective ownership of the unconstrained demand forecast, systemic bias controlled within +/-2%. The ability and accuracy of the process to constrain demand based upon material, resource availability and machine capacity. Generating a credible supply plan and measuring production adherence weekly and monthly against this plan to ensure sales commitments to customers are respected. Controlling abnormal demand when customer orders are over forecast, worst still when they drop orders inside published lead-time. Your ERP is effectively driving the materials requirement plan and accurately performing production planning and detailed scheduling activities. ‘Clear-to-build’ signals are 100% attainable and aligned to the supply plan. Inventory accuracy, raw and finished, is greater than 95% vs agreed entitlement targets. You rock! Then someone asks you to drive integrated business planning.
The synopsis presents two interesting questions; 1) how capable does S&OP need to be before you incorporate IBP and 2) how to advance to IBP when your S&OP process is basic, capable or world class.
Enterprises across the world are still being impacted by the global pandemic, consequent government policies, the Texas freeze and depleted supply channels. It is understandable why business decision are currently dynamic, sometimes spontaneous however, there is increasing evidence, recent events have been an excuse for some leaders to throw away all good planning policies. Global events have generated an environment where accountability has been cast aside. We have gone back to the dark ages where material expeditors, perpetually re-promising and back-order management has become the norm. Perhaps the COVID stress test of existing planning processes has actually identified fundamental weaknesses in what was considered a capable S&OP process. Assuming the logic IBP is predicated on S&OP capabilities, businesses should be systematically disbanding all IBP processes and doubling down on S&OP. Evidentially this is not the case, as I scan the jobs on LinkedIn, IBP is alive and well and more prevalent today than I have ever witnessed.
Smart business are those which continually look beyond the short term horizon and plan activities based upon what is coming while weathering today’s storms. S&OP and IBP are partners with clear and obvious linkages and inter-dependencies however the notion one is predicated upon the other, I believe, is incorrect. The two processes fulfill two fundamentally different objectives however, like most planning processes, they work better together i.e. neither is wholly dependent nor mutually exclusive. This leads to the next dilemma, is it possible to evolve an S&OP process into IBP? I don’t believe so. The objective of S&OP is to synchronize supply and demand over the medium term (typically 12-18months) whereas IBP is to direct the path of the business over the 3 to 5 year horizon. Extending S&OP processes and practices to 3 years does not make it IBP, adding a Portfolio review to the S&OP process does not make it IBP, reviewing supply capability architecture in the S&OP supply review does not make it IBP. IBP is a specific disciple under-pinned by unique skills and brings explicit benefits. The sophisticated thinking is understanding the hand-offs and subset of inter-dependencies between the two processes and appreciating the unique value proposition of each.
