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Summary
Too little cross-functional integration in planning activities blunts the effectiveness of many companies, especially larger ones. Our research finds that a lack of coordination (that is, "the left hand doesn't know what the right hand is doing") adversely affects the performance of a majority of companies. Sales and operations planning (S&OP) was designed to address this issue by bringing together the forward-looking intelligence of different groups; done right, it can do that and more. Ventana Research asserts that S&OP is a core competence that companies must have and must execute well. However, our research finds that in many companies S&OP falls short of this objective because participation is too limited. Until S&OP extends to include all major functions in a company, its effectiveness will remain limited.

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Sales and operations planning integrates several once-separate activities, including the current sales plan, production plan, inventory plan, customer lead-time (backlog) plan and product development plan. It not only integrates planning that concern's the organization's "things" (for instance, products, services and shipments) but assesses the financial impact of these things. S&OP concerns itself with a broad range of company functions and thus should have available information from key units - from marketing, manufacturing, engineering, supply chain/materials management and finance, to name five of the most typical. Done well, the S&OP process also enables effective supply chain management by integrating the typically siloed supply chain planning function into other related planning functions in the organization.

Planning must be a collaborative effort because unilateral decisions seldom are communicated well, which inhibits coordination. The classic example is when marketing fails to inform manufacturing of upcoming promotions soon enough (if at all), which results in stock-outs of promoted items and unwanted inventories of others. Planning collaboratively also enables companies to resolve trade-offs where the "right" decision might not be obvious; an example is to decide whether the first priority should be to reduce inventories and generate cash flow or to push more profitable items to increase reported earnings.

In recent S&OP benchmark research, Ventana Research looked into which functions are most likely to be involved in the process. Among 13 typical roles, we focused on five that provide the best gauge of how broadly S&OP is integrated into a corporation's decision-making: executive management, manufacturing, operations, finance and sales. The results were discouraging. In nearly half (45 percent) of the benchmarked companies with S&OP in place, none or only one of these functions is represented in their process. Only one-fifth (21 percent) include four or five of them.

Overall, our benchmark research finds that companies need to improve both the efficiency and the effectiveness of their sales and operations planning process. We were able to classify only 16 percent of them as Innovative, the highest of the four levels in our maturity classification methodology; in contrast, more than three-fifths (61 percent) are at the two lowest levels of maturity. We believe that broader participation in the process is an important enabler of improving the value of S&OP in any company.

Assessment
To become a mature function in a corporation, S&OP requires broader participation from all stakeholders. Broadening the range of roles involved in it is the easiest first step to take in that direction. When all plans and forward-looking assumptions are linked across an enterprise, executives and other decision-makers are able to evaluate plans more realistically, uncover inconsistencies and risks and assess opportunities most knowledgeably.