In a recent blog post, Portfolio Review Part I, we described which types of companies would benefit by adding a Portfolio Review to their monthly or quarterly S&OP process. In this post, we follow up on that idea by introducing the importance of technology in making the Portfolio Review and S&OP processes a success.
There are several reasons to review the product portfolio on a regular basis:
- Brings roles and teams together on product performance, KPIs, and overall portfolio strategy
- Improves cross-functional coordination and shared risk management
- Helps optimize the product portfolio for cost savings, profit margins, total return, long-range market strategy, or all of the above
For certain companies, such as those with very large SKU volumes or complex product mixes, the Portfolio Review should be a fundamental component of the monthly (or quarterly) S&OP process, just as important as the Demand Review and the Supply Review.
That said, it’s not necessarily easy. In many organizations, different departments operate as silos, limiting collaboration on fundamental decisions about what to make and sell, as well as when, where, and how to sell it. These include decisions about the product pipeline, R&D resource allocations, new product introductions (NPIs), phase outs, pricing changes, margin and profitability targets, life-cycle management, and overall portfolio strategy. These matters are fundamentally important and worthy of purposeful deliberation.
Getting department heads together on a regular basis to discuss challenges and choices around the product portfolio is a great start to your S&OP or IBP process. It’s quite a bit more to leverage those Portfolio Review meetings with the output of an enterprise-grade forecasting and planning system. Specifically, we’re talking about a collaborative and transparent cloud environment that combines advanced-analytic forecasting, process automation, and reporting.
In this workspace, diverse sets of internal business users (and even third-party partners) can share and compare forecasts, budgets, and plans. More importantly, they’re doing so with statistically derived baseline forecasts. These forecasts are far more accurate than the manually entered forecasts featured in most Business Intelligence (BI) and Corporate Performance Management (CPM) systems.
Advanced-analytic capabilities markedly improve the quality of the numbers that you bring to the table each month or quarter. That, if nothing else, is a direct improvement to the effectiveness of your regular Portfolio Review meetings, your S&OP or IBP process, and your strategic planning. Meanwhile, advanced automation reduces your time-to-value by eliminating the labor hours and human error inherent in a spreadsheet-based forecasting processes.
At the end of the day, humans must still decide what our organizations want to achieve. The right software can tell us how best to do it.
There are three essential improvements to expect with any serious investment in supply-demand planning, financial planning, or S&OP and IBP:
- Baseline accuracy
- Decision making
We’ll discuss these benefits in detail in forthcoming blog posts. For now, just remember that you don’t need to be a quantitative expert to get substantial returns from advanced-analytic software. On the contrary, best-in-class applications are designed to make the data and algorithmic technology accessible to non-technical business users. The end goal is to help you make optimal decisions by letting the software do the heavy lifting so that you and your teams can make informed choices.
Stay tuned for Part III and Part IV of our Portfolio Review series, in which we’ll discuss how an advanced-analytic software platform can transform your Portfolio Review and S&OP processes.
About Vanguard Software
Vanguard Software introduced its first product for decision support analysis in 1995. Today, companies across every major industry and more than 60 countries rely on Vanguard Software’s Integrated Business Planning (IBP), forecasting and advanced analytic cloud platform. Vanguard Software is based in Cary, North Carolina.