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Scott Roy

Scott Roy

I was asked recently to clarify my previous objections to a “One Number” planning world! In the late 90’s and early 2000’s there was a movement underfoot to drive the entire organization from a single operating number. In theory that would be a good thing as long as you have the right number. Too many times that one number was driven by finance and in actuality the budget. What ended up happening next was everyone else was left to reverse engineering the budget down to item level forecast or sales plans. In my experience the budget is what the company wants or wishes to happen, not necessarily what is going to happen

When it comes to Sales and Operations Planning (S&OP) you do need to have “One” number that you are executing towards; production planning, purchasing, inventory management, plant operations.   In most companies that one number is not the budget but a demand plan or demand forecast. The demand plan should be a plan that represents the best indication of the future adjusted to the risk that the company wants to plan/execute against. This risk should be made clear in the S&OP process and bought in by everyone. You use the S&OP meeting to develop plans to cover the uncertainties and risk in any plan by maybe deciding to enhance your inventory position or getting more capacity lined up. You want a demand plan to be realistic and probable.

In reality you will have multiple numbers and they will all have a role in the business. You will most likely have a revenue budget, sales targets, and other numbers that people have created.  What you do now is plan to the demand plan and manage to the gap in those other numbers; call them out, make them visible but don’t force all the numbers together for the sake of having One Number.

The bottom line is S &OP has to execute against one number the demand plan/forecast.  You will have other numbers, but you manage to the gaps.  Don’t force a number for the sake of having one number.  The demand plan should be the most realistic and probable out come of the future!

Scott Roy
Collaboration Planning
Wells Dairy Inc