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Sales & Operations Planning (S&OP)

Sales and Operations Planning is a process of balancing supply and demand resulting in communicating an agreed upon plan throughout the organization so that everyone is playing from the same game book. Benefits include increasing sales through customer on-time deliveries, minimizing inventory investment to facilitate maximum profitability. In the schematic below we see the General Manager (or CEO or COO depending on organizational structure) with profit and loss accountability together with direct reports called on to agree upon and execute the business plan. Monthly meetings measure operational results while investigating variances outside an agreed upon tolerance — up or down, and planning forward looking strategies and tactics. An agreed upon rate of sale and production by family establishes the heartbeat for the enterprise.

S&OP executive managements control of the business

Sales & Operations Planning, keeping supply and demand in balance

 

Bottom up planning, top down adjustments

Demand Segmentation supporting detail and aggregate planning

The customer and product structure may be simple or complex depending on the company organization, market segments, sales categories, customer types, product families, suppliers, locations, etc.

Seeking a software tool to support this management philosophy is nearly as important as developing a successful business process. Software requires the ability to operate at the detail and various aggregate levels to satisfy the needs of the functional managers. Planning embraces some or all of: Business Plan, Gap Analysis, Budgets, Bookings, Sales, Shipments, Operations, Inventory, Backlog and Capacity.

For the successful processing of information expect to hold a 5-year historical and 5-year planning horizon with information drilling from year to quarter to month to week to day. Aggregate data is the main form of planning whereas detail may be required to investigate short, medium and long term challenges.

Scenario planning is critical to test strategies. Recording meeting notes is vital as and when we change direction. S&OP is about breaking down corporate silos so that we don’t pull in a circle. Meetings supported with succinct graphical and tabular data facilitate a sound management decision process.