Introduction to Sales & Operations Planning (S&OP)
Overview:
The document begins by introducing Sales and Operations Planning (S&OP) as a strategic process that aligns various business functions—sales, marketing, operations, and supply chain—to meet customer demand efficiently while optimizing supply. S&OP helps organizations control inventory costs and improve service levels by fostering collaboration and consistency. According to the Institute of Business Forecasting (IBF), S&OP coordinates different business areas to balance supply and demand effectively.
Key Considerations:
- Assign clear roles and responsibilities for each step.
- Define expectations for hand-offs, meetings, and communication of changes.
- Establish a cut-off point each month when demand plan edits are no longer allowed to ensure a stable planning cycle.
Expert Insight:
Dr. Larry Lapide, Supply Chain Expert: “S&OP is not just a process—it’s a cultural shift. Success depends on breaking silos and ensuring accountability at every level. Companies should prioritize cross-functional buy-in from day one.”
Typical S&OP Process Overview
Purpose:
The document provides a template for a typical S&OP process, outlining roles, responsibilities, and timing after each month’s close. Steps are either tied to the start of the month or managed on an ongoing basis (labeled “OnGoing”). It suggests loading these into a shared calendar with reminders and meeting schedules.
Expert Insight:
Tom Wallace, S&OP Author and Consultant: “A well-structured S&OP process acts like a heartbeat for the organization. Timing is critical—miss a beat, and the whole system falters. Use technology to keep everyone aligned.”
Roles and Responsibilities in S&OP
Executive Management (CEO/Leader):
- Chairs the executive S&OP meeting and makes final decisions.
- Ensures organizational accountability to the plan.
- Resolves disputes throughout the process.
Sales & Marketing Leader:
- Drives sales forecasting and improves accuracy.
- Presents sales performance and forecasts in executive meetings.
- Oversees monthly forecasting processes and handles strategic sales/customer issues.
Demand Planner:
- Prepares and presents an accurate demand plan.
- Conducts pre-plan analysis and statistical forecasting.
- Collaborates with sales to finalize data and resolve forecast discrepancies.
Sales Personnel:
- Collect customer intelligence and integrate it into demand planning.
- Forecast sales for their assigned customers or markets.
- Analyze actual vs. forecast performance and report findings in sales review meetings.
Operations Leader:
- Ensures the supply plan aligns with production and materials teams.
- Links aggregate data to detailed planning.
- Chairs supply planning meetings and reports on inventory/backlog performance.
Supply Planning and Master Scheduling:
- Updates inventory plans and maintains supply attributes (e.g., safety stocks, lead times).
- Analyzes orders and inventory to determine production schedules.
Expert Tip:
The document recommends using a RACI Matrix (Responsible, Accountable, Consulted, Informed) to clarify roles.
Patrick Bower, S&OP Consultant: “A RACI Matrix is a game-changer. It eliminates confusion and ensures everyone knows their lane—critical for S&OP execution.”
Step 1: Gather and Manage Data
Objective:
Collect past sales data, analyze trends, and assess forecast accuracy to lay the groundwork for planning. Advanced software can automate much of this, though some tasks require ongoing manual effort.
Responsibility:
Led by the Demand Planner, with inputs from sales, marketing, operations, logistics, and finance.
Sub-Steps:
- Manage New/Existing Items (OnGoing): Link new items to planning systems and update existing ones.
- Run Analytics: Use supply chain tools (e.g., DemandCaster) to automate analytics and schedule them as needed.
- Review Performance Measures: Identify key metrics (e.g., sales accuracy, inventory levels) with input from relevant teams.
- Adjust Item-Level Supply Attributes: Set policies like stocking levels and lead times, choosing between Demand Chase (supply fluctuates with demand) or Level Load (steady supply between inventory targets).
Expert Insight:
Robert Stahl, S&OP Pioneer: “Data is the lifeblood of S&OP. Invest in clean, reliable data sources—garbage in, garbage out applies here more than anywhere.”
Step 2: Develop Demand Plan
Objective:
Validate forecasts, account for demand sources, variability, promotions, and new product launches to create a consensus demand plan.
Responsibility:
Led by the Demand Planner, with sales and marketing providing input and verification.
Sub-Steps:
- Create S&OP Review Report: Use software to generate custom reports.
- Share Reports for Input: Distribute to sales and other stakeholders for feedback (recommended).
- Edit Demand Plans: Incorporate performance reviews and sales insights, with a freeze period equal to the longest lead time to limit last-minute changes.
- Finalize Consensus Plan: Review past performance and assumptions in a monthly demand planning meeting with sales.
Expert Insight:
Carol Ptak, Supply Chain Expert: “The demand plan is where collaboration shines. Don’t just crunch numbers—listen to the sales team’s on-the-ground insights.”
Step 3: Supply Planning
Objective:
Translate the demand plan into a supply plan, setting inventory targets, safety stocks, and production strategies (level loading or demand chase).
Responsibility:
Led by the Operations Leader, with input from manufacturing, operations, logistics, and finance.
Key Tasks:
- Assess capacity, inventory, and scheduling to ensure demand can be met.
- Determine production timing and locations based on analysis.
Expert Insight:
Anne Morriss, Operations Strategist: “Supply planning is about flexibility within structure. Build in buffers but avoid overstocking—balance is key.”
Step 4: Reconciliation of Plans (Pre-S&OP Meeting)
Objective:
Resolve supply-side issues, review past performance, and prepare recommendations for the executive team during a monthly pre-S&OP meeting.
Responsibility:
Led by the S&OP Leader, with participation from sales, marketing, operations, logistics, and finance.
Expert Insight:
Eric Wilson, IBF Research Director: “The pre-S&OP meeting is your dress rehearsal. Iron out conflicts here, so the executive meeting focuses on decisions, not debates.”
Step 5: Approve and Release (Executive S&OP Meeting)
Objective:
Present reconciled demand and supply plans to the executive team for approval, resulting in an executable plan for operations.
Responsibility:
Led by the S&OP Leader, with the Executive Sponsor (CEO/Leader) finalizing decisions.
Sample Agenda:
- Review S&OP calendar and critical dates.
- Present aggregate summary (budget vs. actual, performance metrics).
- Analyze last month’s performance (sales, operations, inventory).
- Review 12-month rolling demand/supply plan (e.g., capacity challenges, new products, inventory targets).
- Assign new action items and secure final approval.
Expert Insight:
Lora Cecere, Supply Chain Analyst: “The executive meeting isn’t just a rubber stamp—it’s where strategy meets execution. Make sure the data tells a clear story.”
Benefits and Tools
Benefits of S&OP:
- Lower inventory costs.
- Higher productivity.
- Improved customer satisfaction.
Role of Technology:
Solutions like DemandCaster enhance S&OP by driving requirements planning and enabling seamless transitions from planning to execution.
Expert Insight:
Mike Doherty, Supply Chain Software Expert: “Invest in tools that integrate demand and supply data. Manual S&OP is a relic—automation scales success.”
