S&OP: Should the Budgeting Process Ever End?

A personal survey of 200 randomly-selected companies confirmed that 161 of those companies operate on fiscal calendars that begin in January. 

It’s a safe assumption then that the majority of U.S. businesses can finally hear "Auld Lang Syne" playing faintly in the background as the seemingly endless process of constructing the annual budget nears its end.

I hate to ruin the party, but here’s a fresh thought about the budgeting process: Should it ever end?

Years ago, comedienne Joan Rivers had a line that provides an appropriate analogy for many companies’ approach to the budget process. “I hate housework. You make the bed, you do the dishes, and six months later it’s time to start all over again.”

DS Blog Think about the annual fire drill that many companies go through at budget time. The numbers that go into the annual plan are hatched, nurtured, massaged, overhauled, buffed and polished. They’re published ... and then set aside until next year’s annual planning process starts from scratch again. 

Unfortunately, some companies spend more time and attention refining the forecasts that are plugged into the budget – and then ignored for the rest of the year – than they do on their monthly and weekly operational forecasts that are relied upon to run the business. 

And then there are companies with vibrant Sales & Operations Planning (S&OP) processes.

During the S&OP process, product family forecasts and supply plans are reviewed against the perspective of previous months’ and previous years’ activities, with the added dimension of the impact of current plans on inventories, capacities … and the year-to-date budget. The Sales & Operations Planning (S&OP) process brings consistency and accountability to companies that have the discipline to follow it with rigorous consistency. 

A disciplined S&OP process will add a degree of dynamic accountability to your business. When forecasts or supply plans are changed, the impact of those changes is instantly apparent  … on inventories, capacities and budgets. The numbers are continually massaged from month to month. One of the many benefits of a successful Sales & Operations Planning process is a perpetually refined budget, and a much more efficient and realistic year-end budgeting process. 

If you're interested in ideas on where to start an S&OP process for your company – or some tips on how to enhance an existing process – you can download this S&OP checklist.

As you consider how much less painful and more effective your budgeting process could be next year with the routine discipline of an S&OP process in place, we'd like to be first in line to wish you a Happy New Year. 

Cheers!

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Bill Whiteside was introduced to Demand Solutions in the late 1980s when he purchased the software for a dairy products company (his employer at the time) in Lancaster, PA. On Jan. 1, 1990, he made the ultimate product endorsement by starting a business to market and support Demand Solutions in the Northeast U.S. In his sales, marketing, and support roles, Bill has worked with more than 400 companies across a diverse group of industries.  He writes and speaks frequently on forecasting and supply chain planning topics. Download and read Bill's "12 Supply Chain Forecasting Lessons" white paper today.