S&OP – Sales and Operations Planning

Sales and operations planning (s&op) mean different things to different people. Some render it as the heartbeat of an organization, some call it the control and command system of a company whereas, other render it to be a platform where continuous improvements take place between the strategic plan of the business and its tactical daily operations.

Sales and operation planning is considered to be a powerful decision-making tool for both the business executives and line managers. Through this process, managers are able to view the business holistically and serve as an insight into the future. There are various positive results that have been derived from companies using s&op and include:

  • Improved customer service
  • Reduced inventory
  • Improved decision making
  • Better teamwork

Balancing supply and demand is of great value of every company and has been recognized by organizations. When there is a mix or volume added within this equation, there are these four fundamentals required for making an effective balance for the business. Organizations who operate with these fundamentals can gain excellent benefits from s&op. the role of sales and operations planning are to balance the supply and demand at the volume level. Businesses who can perform well at this stage tend to face lesser issues in balancing supply and demand at the mix level which improves customer service, reduces inventory and brings efficiencies in manufacturing processes.

Another target of the sales and operations planning is to align business plans with financial objectives. At the least, this implies the revision of financial goals however; there are several strategic options available for increasing their sales level of reducing costs.

Why do s&op?

Decision Making

A benefit of using sales and operations planning is that it brings people together for making better decisions. A meeting is held on a monthly basis where problems are raised, tracked and then resolved.

Alignment

Through sales and operations planning, alignment takes place at every level of the company. At the top most level, it is an agreement between marketing, sales, finance and manufacturing on the volume and level of products to be manufactured over the time period of the plan. The functioning of the plan goes beyond monthly meetings; it is a process which gives a direction to the company. Capacity is increased or decreased as per the plan.

Provides Visibility

Through the s&op process, team members have a plan through which they can have an insight of future trends. This level of visibility allows thinking several aspects and in a longer term view. Moreover, the sales and operations plan obtains data from different departments and presents in front of the team. With this, the Operations has visibility to the plans of Sales and Marketing department and the Sales and Marketing has a visibility to the supply plan of the business. In addition to this, even finance holds the visibility to expected revenues and expenses.

Introduction of New Products

Introducing new products is the most risky aspect that a business has to deal with. Even forecasts are tricky as there is no history exists. With new product introduction, costs are leveled up higher, processes tend to change, new suppliers are in, and technical issues are present, quick changing in versions which make inventory obsolete as well as ramping production. Moreover, all stakeholders should be aware about the introduction of the new product. All related operations and finance issues should be resolved. For this to handle, many companies identify the demand of new product on s&op spreadsheet’ however, this requires careful management as the last thing any business would want is lying inventory when the product is gone or dead.

Finance Integration

The purpose of a business is to make money and for this, it needs to take money to make it. Every successful s&op process should include Finance so as to keep the financial plan and the operational plan aligned with each other. Moreover, in difficult times, companies require to monitor all planned spending to assure that there are resources available for implementing the proposed plan.