What is xP&A?
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.
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.
Key benefits of xP&A
Any modern ERP system will have a long list of software features based on the industry they serve and the modules they offer. However, all enterprise resource management systems should have these top 10 characteristics:
- “Single version of the truth” where data is consistent and tailored for approved users
- Up-to-date information and alerts, with self-service reporting across all operations
- Visual presentation of the information with dashboards, KPIs, and analytics to assist in quick and informed decision-making
- Choice of deployment such as cloud, on-premise, or hybrid
- Standard and advanced business processes, like, automation with AI and machine learning
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.
One of the many realities revealed by the rapid upheaval and uncertainty of COVID-19 is that even when the pandemic has passed, old planning methods will no longer be enough. Instead, connected, continuous planning across the enterprise will be the key to rebounding from the pandemic and navigating beyond it. In 2021, we have officially entered the era of xP&A, and it’s here to stay.
More in this series
SAP Insights Newsletter
Gain key insights by subscribing to our newsletter.