As we noted in our last article, Gartner has found that the public cloud market is doubling every four years. And because IT spending is only increasing by 2.2 percent per year, we know that companies in all industries are actually diverting their IT budgets from traditional IT to the cloud.
Still, I can understand why manufacturers and distributors—typically conservative businesses—might be hesitant to move their business processes to the cloud. So let me provide a more compelling reason than, “Everyone’s doing it”:
When you embrace the cloud, you may be able to more fully implement sales and operation planning (S&OP) or integrated business planning (IBP).
S&OP: Collaboration for a Better Bottom Line
Companies like yours have been relying on S&OP for over 20 years. Ever since its development in the 1980s by consulting firm Oliver Wight, the concept of S&OP has helped companies that make or deliver products to synchronize all their business functions in ways that make the supply chain run better.
What does it take to implement S&OP fully? Unfortunately, it’s not just a matter of installing one software platform. It requires a change of mindset, characterized by:
- Moving from email-based communication to more collaborative, “always-on” forms of communication.
- Breaking down planning silos so that each department’s plan is a reflection of the corporate plan—not the other way around.
- Replacing notoriously error-prone spreadsheet-based forecasts with a single source of the financial truth.
If you had to sum up this approach in one word, you’d probably choose collaboration.
IBP: Aligning Every Department with Organizational Goals
IBP is the natural evolution of S&OP. Rather than simply making a few tweaks to S&OP, IBP takes the discipline to a whole new level by aligning the demand plan more closely with the overall financial objectives of the organization. The ultimate goal? Greater profitability.
For companies that have fully embraced IBP, there’s almost no such thing as a “supply chain-only decision.” Stakeholders from other business functions are involved in every decision about the supply chain, and the extended supply chain factors into every business decision.
To implement IBP, companies need to focus on:
- Freeing information from silos so that it’s available for key decisions across the enterprise.
- Seamlessly involving dozens or even hundreds of collaborators in creating and revising the business plan.
- Making sure every business decision reflects the strengths and needs of all your departments.
- Giving your supply chain partners an “always-on” view of demand so that they can react quickly to your needs.
How to Eliminate Barriers to S&OP and IBP
Both S&OP and IBP revolve around the highest levels of collaboration. It’s difficult to reach these levels of collaboration if you’re still running into the barriers that yesterday’s technology presented.
Cloud technology does much to remove these barriers. Imagine letting all your stakeholders access your business planning applications from any web-enabled device with a single logon. Imagine telling them that there’s no longer any need to download data from one database and upload it to another as they jump from one business function to another—everything now lives in one database.
Imagine presenting all your stakeholders with intuitive web tools that are geared to their specific roles, letting them provide their input to the business plan, and aggregating all of this business knowledge in one place, automatically—rather than endlessly forwarding spreadsheets around your company.
Imagine letting them do all of this from a smartphone on your production floor, or from a tablet on the train ride home. Suddenly, mobile devices aren’t just for checking email anymore—they now empower your decision-makers to run your business from anywhere.
This is the promise of the cloud—but it’s not the whole promise. There’s much more I can tell you about how the cloud lets you take full advantage of the burgeoning Internet of Things. More on that in our next article.