What is xP&A?
As the name suggests, extended planning and analysis (xP&A) goes beyond the boundaries of traditional financial planning and analysis (FP&A). Here, the “x” is not a variable that stands for any one department, like sales, supply chain, or HR. Rather, it denotes the breaking down of silos between finance and every other department – and the ability to connect and synchronize plans across the entire organization.
xP&A is a planning approach that takes the best financial planning and analysis (FP&A) capabilities – like continuous planning, forecasting, advanced analytics, and performance monitoring – and extends them across the enterprise. Not only does xP&A give the power of FP&A to operational departments, it eliminates the traditional barriers between finance and operations and connects strategic, financial, and operational plans in real time. This innovative approach covers the well-known sales and operations planning (S&OP) process, to ensure that high-level strategic plans are linked with mid-to-long term operational plans, and demand & supply are balanced. xP&A also strengthens collaboration between operations, finance, and the rest of the business including HR. Important HR tactics like managing headcount and understanding workforce planning, can help organizations become more nimble, and ready to respond to any situation.
By synchronizing plans across the organization, xP&A helps companies improve visibility and become much more agile and adaptable. This has never been more important than right now, when constant change is the new normal and the ability to pivot quickly isn’t just a nice-to-have – it’s a necessity.
xP&A and Gartner
Gartner coined the term “xP&A” in 2020, but the concept is not new. Expanding FP&A beyond finance has been a best practice for several years now – it’s just been referred to by many different names: connected planning, collaborative enterprise planning, integrated business planning, and company-wide planning, to name a few. However, with Gartner’s formal definition, xP&A has become the go-to term.
Extended planning and the end of silos
Sales, marketing, HR, procurement, supply chain all contribute to the bottom line – and they all create their own operational plans. For example:
- The sales team develops plans to meet their targets
- Marketing creates plans for campaigns, promotions, and product launches
- HR builds plans to meet future workforce requirements
- Procurement plans what to buy, from what source, when
- Supply chain teams create demand-based plans for production, inventory, and more
Traditionally all these plans are created in silos, in separate planning tools and standalone spreadsheets – without insight into how they may impact each other. For example, if sales exceeds their targets, will production be ready? Will the right staff be in place?
Linking plans to identify the potential impacts within different departments is at the core of xP&A. It allows businesses to react quickly when a marketing product launch takes off, or there’s a supply chain disruption, or a sudden change in staffing needs. When one plan changes, all the others adapt – and the ship can stay on course.
But of course, xP&A doesn’t just link operational plans to each other – it also links them to financial goals and strategic objectives. This helps CFOs and their teams forecast, monitor, and evaluate things holistically – and excel in their role as strategic advisor to the business. Even though FP&A capabilities are extended to different departments with xP&A, finance teams are still at the helm and perfectly positioned to orchestrate extended planning across the business.
For example, to address potential supply chain disruptions, executives are able to rapidly run simulations of demand, supply and financial changes with agile integrated supply chain planning software and to support what-if analysis, and compare planning scenarios for fast and informed decisions across the business.
Key benefits of xP&A
Extended planning and analysis gives organizations the power to work as one well-oiled machine. Five of the major benefits include:
- Real-time, holistic business visibility. xP&A breaks down departmental silos and creates a single view of plans and performance in real time. Business leaders can use this view, along with cross-functional reporting and analysis tools, to understand the impact of decisions on each department – and on the organization as a whole.
- Single source of truth. Many companies struggle with conflicting versions of the truth – which is usually due to disparate IT systems and massive volumes of data housed in different places. xP&A creates a single source of truth, so planners and decision-makers can all work with the same set of numbers and information.
- Full business alignment. With xP&A, strategic, financial, and operational plans are synchronized – ensuring the entire business is in alignment and working toward a shared vision of success. xP&A also makes it clear how one department’s activities impact another, which encourages teams to collaborate and align on priorities.
- Greater agility. With a cross-functional view of the business and a single source of truth, leaders are better equipped to understand what’s happening in real time and course-correct on the fly. Tight business alignment also helps them rapidly seize new opportunities, spot and mitigate risks, identify ways to cut costs and inefficiencies, and move as nimbly as a start-up.
- Automated, continuous planning. Continuous planning, where plans are continually updated based on changing conditions and events, is central to xP&A. Good xP&A tools make this process easy: when a change occurs in one plan, all related plans are automatically updated. This automation minimizes manual work and keeps everything in synch, even in times of rapid change.
One of the many realities revealed by the rapid upheaval and uncertainty of COVID-19 is that even when the pandemic passes, old planning methods won't be enough. Instead, connected, continuous planning across the enterprise will be the key to rebounding from the pandemic and ongoing disruptions and navigating beyond them. We have officially entered the era of xP&A, and it’s here to stay.
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