The key consideration for the increase in demand is that S&OIS will migrate the firm’s financial planning efforts from one based on the departments’ budgets to one based on the departments’ activities. And, those activities are the building blocks of the firm’s income statement’s model: the S&OIS.

Think of S&OIS as a monthly production planning model (i.e., COGS) extended to the income statement (COGS+ SG&A). Also, with a profit max objective function not cost min. Operations  (aka, activities) are now the foundation of the firm’s financial planning efforts. As such, the  S&OIS department of  analytic supply chain professions must report directly to the  CFO/CEO. The department is, in effect, the financial planning “wheel house” for the CFO/CEO.

That department will provide support to the CFO/CEO in two Phases. Phase I is when the budget is still installed and Phase II is after it is uninstalled. It must be acknowledged that replacing a system as intricately entangled as the budget is with the firm’s operations will be a challenge for both Phase I and Phase II. So, what follows is an attempt to describe some possible support efforts within each Phase.

Phase I:

• As S&OIS is updated with a new forecast, new profit opportunities will likely be identified. If the opportunities are significant enough, CFO/CEO can make some “in flight” course corrections to the budget to improve profit. Given S&OIS has departmental line item details, all that’s required is to compare the affected S&OIS’s departments’ new costs with the departments’ budgeted costs and adjust the appropriate budgets.
• S&OIS could replace five “work arounds” adopted because of traditional budget;s limitations. They include zero-based budgeting, activity-based budgeting, linear budgeting, Sales&Operations Planning and Integrated Business Planning.
• Those same activities represent an opportunity to change the department managers’ bonus plan from managing costs to improving the efficiency of activities in their departments.
• Share S&OIS’s results with firm’s stock analysts
• There are also four advantages S&OIS has that have little to do with the budget. See “Additional S&OIS advantages S&OIS has for CFO/CEO on the Home Page.
• Phase I is also the time during which the department is working with the CEO/CFO develop the plans to replace the current budget in Phase II.

Phase II:

Budgets generically have a variety of objectives. However, each firm, typically, tailors its budgeting objectives to meet its particular needs. So, there can be no “one size fits all” plan to replace it.  Each must be specific to the firm and will be developed during Phase I.