Both refer to aspects of an organization's overall planning process, and their outcomes are, to an extent, linked. However, they differ in terms of function, purpose, detail, and planning horizons. To understand how these processes relate, it's first necessary to appreciate their differences before considering how information feeds from one level of planning into the other.
Organizational planning is divided into three broad categories:
Each level is naturally linked. For example, the strategic plan of a manufacturing company may envisage goals to achieve a certain production volume, revenue and level of profitability over an extended period of time. Its tactical planning determines how the organization intends to achieve those goals with clearly defined medium-term targets for overall production volumes, revenue and profitability. The operational plan finalizes exactly how these goals will be achieved in terms of actual planned production volumes, sales and revenue.
Each level of planning operates over a different time horizon determined by the type of organization.
Sales and Operational Planning (S&OP) is a tactical planning exercise that bridges the gap between the organization's strategic planning process and its operational plans. As originally envisaged, sales and operational planning brought together procurement, manufacturing, logistics and sales to manage and determine medium-term sales and marketing strategies. Meetings are typically held on a monthly basis and more effectively integrate activities to manage and drive sales over the next six to 12 months. S&OP planning is usually driven from a sales perspective and managed by the chief supply officer. Typical KPIs would include:
Integrated Business Planning (IBP) takes the S&OP process a step further by introducing finance and other crucial departments in the process. The key differences between S&OP and IBP include:
Typical IBP KPIs are expanded to include financial measures such as revenue, profitability, and return on investment with a focus on aligning future sales and production with the organization's annual budget.
Production scheduling, often also called production planning and scheduling, is an operational exercise focused on managing manufacturing production over the short-term, generally for the next week, month or at most three months. It's a detailed process often supported by ERP and MRP2 software and represents the exact production plan for the next period right down to the number of units produced on each line per day. Functions involved include:
KPIs would include:
Production scheduling is a high intensity, fast-paced process driven by operations personnel on the front line. Its primary focus is meeting production plans and delivery targets.
The primary link between S&OP or IBP and production scheduling is that one forms the basis for the other. While S&OP and IBP planning represent a rolling forecast of future sales and production volumes over the next three to 12 months, production scheduling represents the detailed implementation of that plan for the immediate future, usually for the next week or month.
As already indicated, time horizons vary depending on the industry as well as its S&OP maturity. What often happens, however, is the S&OP execution loses sight of its goal to plan the future and gets bogged down by short-term production issues. It's in these situations that the boundaries between S&OP, or IBP, and production scheduling can become blurred.
While production planning and scheduling deals with detailed planning requirements down to individual product, as well as machine and production line level, effective IBP takes a much broader view, focusing on operational performance of the entity as a whole.
The outcome of a production scheduling process is a detailed, line-by-line, product-by-product plan for the next few weeks or months. Production planning is a complex exercise involving a great deal of detail, often involving hundreds or thousands of parts and components, each of which must be made or supplied just at the right time so that final assembly proceeds smoothly.
IBP usually takes a much broader approach, focusing on the big picture, although it's essential that these processes make allowances for the complexity of the production process to avoid producing an unworkable plan. A well-thought out IBP that integrates all elements of the business into one workable plan is crucial for organizational success.
IBP and production scheduling both rely on some form of business modeling. In the case of IBP, the model must reflect how the organization as a whole functions. This model may exist in many forms, such as in ERP, on spreadsheets or in a business modeling program. Similarly, production scheduling requires a detailed model of a particular production facility that's usually represented in spreadsheets, ERP, MRP or a similar production planning program.
A vital step in all planning processes is the ability for planners to consider trade-offs, evaluate what-if scenarios and determine optimal outcomes. While this degree of functionality doesn't exist in most planning solutions, it is possible if models are developed using prescriptive analytics software. Whether for IBP or for production planning and control, the approach is similar in that a mathematical model is prepared which emulates exactly how the business operates. For production scheduling, the model is highly detailed, whereas for IBP, it must accurately represent broader business aspects and need not necessarily have the same level of detail. In both instances, prescriptive analytics modeling allows planners to determine optimal solutions that improve efficiency, reduce cost and increase profitability.