Aberdeen Group: The Technology Strategies for Integrated Business

The Technology Strategies for Integrated Business
Planning Benchmark Report
How companies need to revise their Sales and Operations Planning
Processes and Technologies to Improve Corporate Performance





July 2006
The Technology Strategies for Integrated Business Planning Benchmark Report
Executive Summary
Based on a survey of nearly 140 enterprises between June and July 2006, Aberdeen re-search finds that the top 5 pressures for improving S&OP processes are rising customer order fill rate expectations, better return on net assets, shrinking profit margins, customer retention pressures and extended lead-times due to global sourcing. However, current S&OP processes are failing to alleviate many of these pressures. While a majority of companies report that S&OP has helped improve forecast accuracy and im-proved cross-departmental communication, most companies have failed to see improve-ments in profit-related metrics like gross margin and customer retention. Aberdeen research finds that traditional sales and operations planning (S&OP) processes and supporting technologies are no longer sufficient in today's high-pressured business environment. Sales and Operations Planning has evolved to become Integrated Business Planning. It is a truly cross-functional, multi-dimensional process that includes all ele-ments of demand, supply and financial analysis in relation to the business goals and strat-egy.
Opportunities for Improving on Current S&OP Technology and Proc-esses . S&OP frequency: Companies with more frequent S&OP processes are experi-encing better order fill results. . Siloed S&OP: S&OP processes continue to be driven by individual organiza-tions in the majority of companies (83% of companies) and only 17% of compa-nies have cross functional teams. . S&OP technology adoption: 41% of the companies surveyed reported that they are using spreadsheets for their S&OP solution. Nearly 30% of these companies have ERP solutions that are capable of doing S&OP demand and supply plan-ning, but these companies have chosen to supplement with spreadsheets for their S&OP process. . Executive reporting: 74% of companies are reporting that they don't have ade-quate executive level reporting for the key performance indicators of the S&OP process.
Characteristics of Integrated Business Planning The key differences of an Integrated Business Planning process compared with a tradi-tional S&OP process are shown in Table i.
All print and electronic rights are the property of AberdeenGroup © 2006. AberdeenGroup . i The Technology Strategies for Integrated Business Planning Benchmark Report
Table i: Integrated Business Planning Process vs. Traditional S&OP

Area Traditional S&OP Integrated Business Planning Business Supply/demand balancing Not simply about matching demand and Objective meeting customer needs. Considers several plan alternatives and chooses one that best represents the business drivers. Objective is revenue and profit Process Rigid and prescriptive Process is more rules and exception based Technology Weak and non-integrated Technology enables the processes through workflows Frequency Monthly or quarterly Still monthly in lot of cases but with abil-ity to rapidly handle exception situations Focus Inward focused Collaborative and outward focused
Source: AberdeenGroup, July 2006
Role of Technology in Supporting Integrated Business Planning 78% of companies say that technology is either critical or very important for their S&OP process. Data management., multi-dimensional goals and views, more dynamic business processes, more decision parameters are the key reasons why technologies are essential to support Integrated Business Planning processes.
Technology Spending Plans 40% of companies indicate that they plan to spend more on S&OP technology in 2006 versus 2005, while only 13% say they plan to spend less. Tellingly, companies with best in class order fill rates plan to spend more on S&OP technology than their peers (an av-erage of $250,000). This indicates that the best in class companies see S&OP technology as critical to improving on their already strong corporate performance.
Recommendations for Evolving Towards Integrated Business Pl... [download for more]