S&OP
Strategy
Vendors Factories Distribution Centers Customers Modals Components Finished products Machines Planning Periods
Sales
Logistics
Items Availability Batch Size Initial Inventory Safety Stock Maximum Stock Final Stock Transport capacity in modals Inbound DC Capacity Outbound DC Capacity
Production
Bill of Materials Resource Assignment Number of Resources Hours Available in the Period Preventive Maintenance Resource Consumption Resource Efficiency Production Yield Extra Capacity
Finance
Product Prices Tax rates on products Procurement Costs Resources Fixed Costs Extra Capacity Cost Product Variable Costs Inventory Costs Transportation costs
Result
Integrated Plan Financial Report Social Responsability Environmental Responsibility Supply Procurement Plan Production Components Consumption Plan Production Plan Inventory Plan Production Plan by Resource Resource Usage Plan Extra Capacity Usage Plan Logistics DCs Input Plan DCs Output Plan Inventories on DCs Plan Component Transport Plan Product Transport Plan Modal Usage Plan Sales Delivery Plan Non-Delivery Plan
Login



Start Strategic planning Marketing & Sales Logistics Production Finance FAQ About

Financial planning for S&OP

During a stressful period of a down market, many companies miss the opportunity to fine-tune their business with counterintuitive decisions. Executives get consumed with declining sales and severe competition and fail to take advantage of the new business conditions. Although surviving is the key priority, executives should not neglect the company's future. This ability to set an S&OP process in a down economy is strategic before the market turns. Companies with mature S&OP have robust planning processes and synchronized execution. The value of these planning processes manifests more in a stressful environment.

A frequent recommendation in a business downturn is immediately stopping all discretionary spending. This approach avoids cuts that adversely affect people but sends the message that the future is on hold until better times. However, discretionary spending has a value during a turn-down. Leaders should consider the impact of discretionary spending on helping to ensure future growth and profits.

In a crisis, leadership often postpones capital investments since returns become further into the future. Building a new office may not make sense, however, investing in equipment does. During a downturn, used but almost new production equipment often unfolds in the marketplace. They can be acquired at a discounted price and faster. During this time, machinery acquisition can make the net present value (NPV) and the return on investment (ROI) more sensible and support a rapid ramp-up when the economy turns positive.

Moreover, even when budget cuts are under consideration, there is an opportunity for high impacts' improvements. Keep the workforce challenged and positive show employees that you are investing now for the future. It shows that you believe in the company's future and prevents the loss of key talent.

Another budget pitfall is the initial cut spread evenly across the entire organization. Although it is apparent a democratic way of sharing the pain, it hurts company survival and its future growth. Portfolio and customer relationships should remain fresh, therefore, protected. Weaknesses in any of these processes can put the company at risk.

One additional financial budget trap and a risk-taking decision is to redesign the organization into an economically viable enterprise in the short term to satisfy investors. Leaders should know their current performance situation, their vision with goals set, and a clear development path. Strategic planning also must have a clear definition of future markets, customers, products, costs, prices, and customer services. When the environment is at its worst, tough decisions about markets and products are required.

Integrated S&OP creates a tactical plan from the strategic plan and sets the goals for sales, marketing, production, logistics, and financial planners. The business plan brings strategy into tactics and enables the negotiation of reasonable expectations. The S&OP is a decision-making process to align strategy, portfolio, demand, supply, and finance through a focused and exception-driven monthly re-planning process. It is closed-loop planning and a feedback system. The result is a single Integrated operating plan over a 12-18 month rolling horizon which senior executives use to guide their teams to execution.


Start
All articles
FAQ