What Is Sales and Operations Planning (S&OP)?

S&OP is a structured monthly process that aligns all functional areas under a unified set of assumptions to enable and coordinate decision making. It integrates demand, supply, operations, and financial planning into one game plan for business. It also links strategic plans to operational plans and attempts to provide a decision-making framework to maximize sales and profit.

S&OP From A Demand Perspective

A key concept of S&OP from a demand perspective is that we are building a plan of what the Sales & Marketing organization will deliver. To better do this, we need to utilize the process to develop an unconstrained and consensus demand plan and relay this information to other functions in the S&OP process.

S&OP Helps Balance Demand and Supply

Demand Planning, with the major output being the Demand Plan, is just one important aspect of S&OP. We still need to look at other trade-offs like balancing our demand with our supply capabilities. With a more mature S&OP process, it is about managing trade-offs like these and other functions through structured process steps. These usually include:

  • Product Review: To discuss current and future product portfolio, NPL/EOL strategy and portfolio optimization as well as SKU complexity and component rationalization.
  • Demand Review: The process through which a consensus demand plan is generated, from internal as well as external inputs.
  • Supply Review: Defines the supply response constraints and gaps in fulfilling the consensus demand; aligns demand, supply and financials; and develops options to mitigate financial and capability gaps.
  • Financial Planning Alignment: Gets the financial view of the consensus S&OP plan aligned to a unified set of assumptions and number.
  • Executive S&OP: Resolves critical gaps between demand, supply and financials (Strategic integration of business plans for exception-based decision making).
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