The immediate response to surviving an economic downturn involves battening down the hatches and simply weathering the impending storm, cutting whatever is necessary to make it through the chaos. Marketing usually falls to the wayside, workers are cut, and prime opportunities to position your company as a customer service or market leader pass by unnoticed.
You may be hearing some of the most promising news that's come along in months, however. Yes, the bleak outlook that companies had just a few months ago is transforming into a positive, though cautious, attitude. While economic experts have noted a five percent growth in the economy, your segment may not fall within one of these industries. Regardless of whether your industry is included or not, Integrated Business Planning or Sales and Operations Planning (S&OP) remains a necessity not only to surviving an economic downturn but also succeeding, both now and in the future.
One of the few perks of a recession is that it eliminates underperforming players, practically wiping the slate clean for your company, helping it to gain a better foothold in the market, and effectively evaluate business initiatives and goals. This downtime is key to winning customers and ensuring you have systems robust enough to weather any other potential storm along the way. With a well-positioned Integrated Business Planning, or Sales and Operations Planning (S&OP) process in place, flare-ups can be dealt with immediately, and issues can be managed without constant monitoring. Not only are short-term solutions presented, but long-term tools for surviving another economic downturn are addressed as well.
Key Points to Remaining Successful
In terms of weathering this or any other recession, management is the glue that keeps the company together. When management spends excessive amounts of time addressing daily issues rather than focusing on the big picture, however, a lapse in meeting market and customer demand occurs.
With so many factors in play, what can management do to ensure the company beats the competition and identifies ways to deal with the eventual uptick in business? Following are three key points to remaining successful:
1. One way to weather the storm is to make preparations that are specific to your business. Luxury items, for instance, are taking longer to rebound in the market; and while people are finally cracking open their wallets, these funds are usually spent on lower-priced items.
How has the recession affected long-term consumer expectations? Part of Integrated Business Planning involves an in-depth evaluation of your business model, including asking:
--What are our differentiators? Should they be streamlined to meet the changing business landscape?
--Why do we sell this product? Are we known for our prices? Are we fooling ourselves if we think we can make money on this particular item?
--What are our strengths? Do we focus on higher-quality products with lower prices?
Point blank, to succeed, you must always emphasize your strengths - even though the easiest answer may not be the best solution to your problem. The only way to gain an accurate picture of your current and future situation is to assess your strengths and weaknesses honestly and identify core competencies that set you apart from the crowd.
2. Another solution to surviving an economic downturn is to introduce stress through technology. Technology can provide data models that identify gaps in plans or aggregate data from multiple sources that save the company time and money. These are important tools for successfully surviving an economic downturn. During this period of introducing new technology and evaluating new processes, it's possible that the company may either lose or gain market share.
Over time, your Integrated Business Planning processes will mature, helping you and your team pinpoint supply and demand goals, understand financials in greater depth, identify acquisitions, and improve cash flow management.
3. It is the responsibility of executive management to take the time to challenge themselves to think differently about their business. Oftentimes, however, cultural factors within the work environment can prevent positive breakthroughs. It falls on the shoulders of the management team to challenge pre-existing notions and beliefs about the business. Sure, the economy will change, but nothing is guaranteed, which is why having the proper Integrated Business Planning tools in place ensures the company will continue to profit and push ahead.
Strategic Integrated Business Planning, if implemented in every element of the company, should address the following:
--In terms of our competitors, leads, and sales, where are we?
--What are our future goals, and where do we go from here?
--How will we get to that point? What strategy do we have to address these goals?
--Who are our customers? In which market or region will our products/services fare best?
--What do we sell? Will our services and/or products change at any time?
--How will we triumph over our competitors? What makes us different?
Emerging Victorious from a Downturn
Winning (and, for the time being, surviving) in an economic downturn means that you must evaluate your bottom line with open eyes and honestly assess the situation. In many cases, the outlook may still prove bleak, but times are getting better. Integrated Business Planning and preparation ensure you have something to fall back on when the storm gets too rough. Addressing both the short- and long-term issues that plague your business in a downturn through various Integrated Business Planning tools also ensures you've evaluated all aspects with a mind responsive to change and growth.
Evolution of S&OP into Integrated Business Planning
Sales and Operations Planning is evolving into what many companies are now calling Integrated Business Planning. It is no longer just a process for aligning product portfolio plans, demand plans, and strategic plans.
The key driver of this evolution is the benefits companies realize from integrating ALL company processes into an Integrated Business Planning process that the executive team uses to manage the business.
The key differences between S&OP and Integrated Business Planning are:
--Greater financial integration across at least a 24-month planning horizon resulting in improved information for decision-making and greater accountability.
--Financial performance metrics.
--Inclusion of strategic initiatives and activities in the monthly IPC management process, reinforcing that one primary management process is used to run the business.
--Improved modeling and simulations to help develop contingency plans for changing operating and financial parameters.
--Easier translation from detail information to aggregate and aggregate to detail enabling more quicker, more timely simulations and greater granularity of information for operations and finance.
--Improved decision-making through an integrated reconciliation process to keep decisions at the lowest practical level.
--Improved trust throughout the management team with one process, clear accountabilities, and commitment to the behaviors required to ensure the Integrated Business Planning process is effective.
About the Author:
Rick C. Burris is a principal and senior executive for Oliver Wight Americas, a global S&OP (Sales and Operations Planning) firm with a 40 year history. He has over 30 years of executive, management, and process experience in diverse industries and is a frequent speaker at APICS. Burris has been published on several subjects, including turning around distressed businesses through the real-world use of world class best practices.