S&OP – Sales Operations Planning

Value creation across the planning horizon

Behind the acronym S&OP lies one of the most important and sometimes least structured processes in manufacturing companies: Sales Operation Planning, i.e. the planning of sales and operations at managerial level.

What is S&OP?

Sales operations planning (S&OP) is a supply chain planning process to help business leaders make decisions on a wide range of topics.

Sales and operations planning are a process for better matching a manufacturer’s supply with demand by having the sales department collaborate with operations to create a single production plan.

The objective of an S&OP model is to balance market demand with the company’s supply capacity.

S&OP processes are, by their nature, linked closely to business and company policies, so each company follows a different model and different methodologies to address this issue, one of which is sales planning.

 

Is S&OP a strategic planning process?

Sales and operations planning (S&OP) is an integrated business management process through which the executive/leadership team continually achieves focus, alignment, and synchronization among all organization functions.

The S&OP process includes an updated forecast that leads to:

  • sales plan
  • production plan
  • inventory plan
  • customer lead time (backlog) plan
  • new product development plan
  • strategic initiative plan
  • resulting financial plan

Plan frequency and planning horizon depend on the specifics of the context. Short product life cycles and high demand volatility require a tighter S&OP than steadily consumed products. Done well, the S&OP process also enables effective supply chain management.

What is the process flow for Sales Operations Planning?

S&OP consists of several steps, usually carried out in monthly meetings. The names and numbers of the steps in each company’s planning process vary, but all have the following in common, in order:

  1. Demand planning. Processes for analyzing, forecasting and influencing demand, including demand sensing.
  2. Procurement planning. Process of identifying and consolidating requirements and determining the timeframes for their procurement with the aim of having them as and when they are required.
  3. Production planning. Assessing production and distribution capacity and constraints. This involves a wide range of activities, including forecasting, managing the supply chain, tracking inventory and scheduling jobs.
  4. Distribution planning. Process of determining the right amount of manufactured goods to be shipped to each distribution center or warehouse in order to satisfy customer demand.
  5. Financial planning. Process of taking a comprehensive look at your financial situation and building a specific financial plan to reach your goals.

S&OP is closely related to, and often a component of, integrated business planning, a more comprehensive and long-term planning process that collects the plans of every department and ties them to the company’s financial performance and strategy.

 

S&OP software

While S&OP is first and foremost a process, not a technology, several types of software often play important roles in automating the process and facilitating collaboration among sales, finance and operations, making relevant data more accessible and providing analytics and simulation of what-if scenarios.

 

Through the sedApta Suite, we are able to offer companies an integrated ecosystem based on a new methodology and implementation approach. In addition, thanks to the modularity of the Suite components, companies will be able to support and coordinate function and process interoperability and orchestrate complex business flows and multi-role situations in a multi-product space.

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