When we think about IBP – Integrated Business Planning – we need to consider the roles of the various planning functions in the company:
- Demand Planning
- Supply Planning
- Sales Planning
- Financial Planning or Annual Budgeting
Often the role of Sales Planning function is blurred in the presence of a strong and visible Demand Planning group leading the S&OP process. Sales Planners are relegated to the role of agents and middlemen between the Demand Planners and Sales Managers. Sales leaders that are protective of the time that Sales Personnel spend on forecasting will even use the Sales Planners as shields from the Supply Chain. In extreme cases, the organization even splits the demand planning responsibility into two –
- Baseline Forecasting – DP
- Promotional Planning – Sales Planning
In such an extreme, no body will own the complete demand plan. What is the role of Sales Planning?
Sales Planning function plays a key role in facilitating the selling process and to aid and enable the Sales Force to achieve targets, optimize their spend and improve overall account profitability. So their role has a dual purpose – to improve demand visibility for Sales Management and Corporate Supply Chain as well as to optimize the Spend and improve the ROI on the various spending plans. On an on-going basis they facilitate the bi-directional communication between Field Sales and Corporate supply chain. Their primary loyalty to Sales Management dictates that they focus on providing market insights at an aggregated level to the Boss and to ensure the spending plans and goals are met. If there is a lack of proper integration to the Demand Planning function, then this primary loyalty will dominate their role in the supply chain. For example, the integration breaks down if the Demand Planners are forecasting and planning at the product level only – systems and processes are not designed to develop a bottom-up customer forecasts. In such a case, the Sales forecasts are just mere comparisons to the product level plan. There are three key building blocks essential for integrating Sales Planning function into the S&OP Process:
- A Bottom-up customer based Forecasting process where the total supply chain forecast is the sum of the individual customer level plans.
- The ability to develop plans at the sell-through level or a consumption based forecast instead of a shipment plan.
- Finally a sophisticated process that will enable event modeling and promotional planning to clearly identify the effect of promotions.
Many companies today arbitrarily come up with promotional volumes and incorrectly estimate the ROI of the promotional spend. This will be a leaking pipe that will drain your account profitability. Developing a process and system to do event modeling for promotional programs is the holy grail that will spark of the interest of the Sales groups in fully integrating with the S&OP process. In summary, Sales Planning functions are critical for better Sales Management as well as for an effective S&OP process.