The Sales and Operations Planning (S&OP) process has always been the battleground for synchronizing supply constraints with demand opportunities. The measure of a successful S&OP process is its ability to create an actionable consensus plan that provides the operational blueprint for matching supply to demand profitably. Traditionally, S&OP was viewed as a senior management decision-making process that ensured that the tactical plans in all business functions—sales, marketing, and demand and supply management—were aligned and loosely supported the overall business plan.

But recently, S&OP has evolved into the concept of integrated business planning, the process of constantly realigning decisions in the sales, marketing, demand and supply areas as well as synchronizing with the strategic financial plans. This creates a consensus operational plan for supply and demand matching.

From an organizational point of view, integrated business planning requires the alignment of business planning, financial, sales, marketing, and supply chain to build a consensus operational plan that serves as the blueprint for operations.

To support integrated business planning process, technologies must provide functional capabilities in managing demand, supply and financial activities, specifically in the following functional areas:

• Pre-S&OP Meeting—Demand-side: In this meeting, functionality includes the ability to collect sales and marketing data, to sense unconstrained demand, to develop demand forecasts, arrive at demand consensus and shape unconstrained demand.

• Pre S&OP Meeting—Supply-side: This meeting analyzes the unconstrained demand plans from the Pre S&OP—Demand-side and analyzes it against production plans, inventory availability, and capacity constraints. It conducts what-if analysis to identify demand shaping opportunities that minimize demand shortfall based on constrained capacity.

• Pre S&OP Meeting—Financial-side: This meeting reconciles operations with financial business goals. It analyzes the output of the Pre S&OP—Demand-side and Pre S&OP—Supply-side against financial goals, based on revenue and profitability targets, business goals and customer service level commitments. It conducts what-if analysis to identify demand shaping opportunities that maximize the profitability of assigning constrained capacity to customer demand.

• Conducting the S&OP Meeting: This is where all the “Pre S&OP Meeting” work comes together. Functionality includes the ability to review alternative scenarios and converge toward a consensus plan. Functionality includes collaborative worksheets, trade-off analysis and exception management to pinpoint the impact of different demand, supply or financial alternatives.

• Post S&OP Meeting—Execution and Monitoring: Here, functionality includes communicating the consensus plan to operations as a blueprint until the next S&OP meeting or checkpoint. Capabilities also include monitoring operational progress against the plan, using KPIs such as forecast accuracy, profitability and revenue variance, inventory variable or customer service variance.

In addition to the standard recommendations for implementing any enterprise technology—like executive sponsorship, allocating adequate in-house resources, soliciting the help of system integrators, measuring user adoption and others—AMR Research recommends that companies looking to implement a successful S&OP technology tool:

• Assess your S&OP process and organizational readiness: Given the cross-functional nature of integrated business planning, companies must understand the maturity of their S&OP process and the readiness of their organization before making the technology investment. Without cross- functional stakeholder buy-in, the tool will undoubtedly face poor user adoption. Companies with successful S&OP deployment assign an S&OP lead that gauges performance gaps in current processes and works cross-functionally to improve organizational awareness.

• Analyze data availability, quality, and integrity. The most recurring hurdle to success we've heard of is data unavailability, fragmentation or poor quality. This comes as no surprise since much of sales, marketing and supply chain data still reside in individual spreadsheets and disparate ERP systems. Cleansing and harmonizing enterprise data before deploying S&OP technology will improve users' trust in the data, which will in turn lead to higher adoption. Companies with successful implementations allocate ample time and resources before technology implementation and conduct a data availability and quality audit.

• Find out if you already own a tool that can enable S&OP. If you have deployed technology in business intelligence or supply and demand planning, determine if any of these tools offer S&OP functionality. Granted, those specific tools might not meet your future vision of integrated business planning, but they can provide a cost effective solution for your initial S&OP needs. Talk with your IT department or your current vendors to assess the solutions already available to you. Companies who are most satisfied with their S&OP technology have typically started the process by extending an incumbent tool to meet initial needs.

• Wean your users off of spreadsheets gradually and carefully: Remember that there is a reason why spreadsheets are so popular: they are easy to use, customizable, and reliable. Their limitations in performance, version control and data harmonization typically do not minimize their appeal to individual users. Expect user resistance in migrating to the new platform. To help with this transition, insist that the S&OP tool that will serve as the system of record can offer a user experience comparable to Excel.

The need for integrated business planning will only grow, as companies realize the benefits of synchronizing demand response across all functional areas. For S&OP vendors to capitalize on this growing demand they should:

• Sell within current customer base: Many user companies indicated that after conducting a tool search for S&OP technology, they decided to go with the incumbent demand planning or supply planning vendor. They believed that their incumbent vendor understands their business goals and challenges and that their S&OP tool would provide the fastest time to value and the easiest transition for their users. To ensure that you capture these up-sell opportunities, proactively present your clients with the value proposition of extending current solutions with S&OP functionality.

• Enhance solution's usability, collaboration, and consensus building capabilities. In a number of interviews we conducted, companies stated that the final tool selected won for its ease of use and its ability to harmonize data streams across flexible hierarchies. This need trumped more analytical needs like depth in simulation or demand forecasting. Of course, every client's needs are unique. But given that the S&OP process is ultimately about the convergence of insights from varied stakeholders, capabilities like consensus building, collaboration and a friendly UI will always play a key role in users' needs.

• Insist on process and organizational readiness. It is in the best interest of vendors to be realistic about a prospective customer's ability to implement S&OP technology. Selling a technology tool that far exceeds your client's process and organizational readiness will result in a failed project and dissatisfied customers. Offer your services or partner with a system integrator to resolve prerequisites like stakeholders' buy-in and data harmonization.

• Partner to build end-to-end integrated business planning: Coming from different backgrounds, S&OP software providers have distinct strengths and weaknesses. But to offer an integrated business planning solution, a provider must possess a tall order of domain expertise in demand, supply and financial management as well as collaboration, usability, exception management and many other areas. Finding a partner that helps you fill in your functional white space can allow you to go to market with an integrated solution, faster than other competitors.