In today’s competitive consumer and industrial products and high-tech industries, the ability to rapidly respond to changing market demands and accurately forecast earnings is a competitive advantage. Earnings surprises have a direct impact on a company’s stock price, and organizations that do not react nimbly to unexpected market shifts can lose competitive standing. Our experience shows that a lack of integration between financial planning and sales and operational planning (S&OP) processes can be a contributing factor to poor forecast accuracy and delayed response to changing business conditions.
Consumer, industrial, and high-tech manufacturing companies, in particular, have significant requirements for robust S&OP processes due to demand and portfolio variability. Industries requiring strong S&OP capabilities often will have difficulty integrating them with financial planning processes due to inherent differences in level of detail, timing, and key stakeholder goals and incentives. These differences complicate comparison of S&OP and financial planning results and hinder a company's ability to understand the financial implication of S&OP outputs.