Over the next few weeks I plan to do several blogs around two topics. The first is a regular part of Lean Accounting or the Lean Management System – the Sales, Operations, and Financial Planning process (SOFP). The second topic covers the innovative requirements of the Lean Accounting for New Product Development. The purpose of these upcoming blogs is to initiate discussion and have group members share their experiences with these issues.
Sales, Operations, and Financial Planning (SOFP) – Blog #1
Some people think that lean companies don’t have to do much planning. The companies are agile, quick on their feet, and turn on a dime…… etc.. Nothing could be father from the truth. In order to be agile, responsive to customers’ needs, and provide very short delivery times, a company must have an excellent planning process. The purpose of the planning process is to coordinate the activities of the true value streams so that these value stream can provide excellent performance both short term and longer term. SOFP is that planning process.
Many lean companies organize their operations by value stream. This helps a lot because some of the people involved in the planning processes are working together in the value stream all day every day. There’s already a team in place. Even so, it is common for the sales and marketing people and distribution to be organized differently because they address different markets or different geographic regions, and so forth. The New Product Development value stream often serves more than one of the order fulfillment value streams. The financial people may not work in the value streams either. It is important to do the planning across the entire value stream – short and longer term. The SOFP process is formal and highly structured. Each step has clear agendas and detailed deadlines. All companies do planning in one way or another. The question is: Do they do it well? SOFP make effective use of everyone’s time because it replaces the department meetings and the various formal and informal meetings that go into traditional planning processes. Above all, SOFP is done across the entire value stream so that everyone is aligned.
SOFP is generally a monthly process and is often set up as a 5 day process during the first week of the month.