Sales and Operations Planning Reviewed And Explained

Zurab Samushia
Jul 20, 2021

Definition of sales and operational planning process

Sales and operations planning (also often being shortened to S&OP) has multiple definitions, depending on where you read this information. S&OP meaning is a follows: it is planning in the company, which is performed on all levels, considering information about available finances, materials, manufacturing and engineering capacities & marketing, gathered from all departments, to make sure the execution of the sales plan with the most efficacy from the points of view of labor, terms, time, materials, facilities, and equipment. To put it super simple, the definition of operations planning is as such: to make sure you make the product output in an optimal manner, time, and cost.

If you’re asked to define an operating plan, then it would be logical to say that it is a kind of planning, where a product output is put in the center to make it possible to execute the sales plan in fullness as it is defined/forecasted by the company’s management. So, in this approach, sales are put on top of everything, making all other processes of the company work on reaching the output + sales plan.

As a result of the execution of this complex main process, it is possible to reach a high level of quality, stability of output given seasonal demand and supply fluctuations, optimal resource usage, and establish the price, which would be better than your competitors have. It is also about achieving higher quality and on-time delivery, which also are major factors in outperforming your competitors. Eventually, if everyone in the company is ultimately interested in the provision of the best in the operational planning and the process will be made on a daily basis, a lot of improvement capacities will be implemented into life, allowing a company to grow better than the market grows.

S&Op processes explained

A typical process of this planning can be given as a high-level operational planning example:

  1. Do the sales forecasting
  2. Do the demand planning
  3. Do the supply panning
  4. Make the first draft of the S&OP and reconciliations
  5. Finalize S&OP and implement
  6. Review on a recurring basis to fine-tune.

These 6 steps, when performed correctly and stably, are able to improve product stocks, decrease or eliminate idle manufacturing time, make sure all processes are performed more efficiently (and thus, cheaper), and optimal resources are put into the production. Planning from the sales level, the rest of the applied resources (including human) are aligned to fit the needs, which can lead to effective cost-cutting across all company’s departments. The recurring planning shall depend on the cycle of the product life (consumption) and can be completed anywhere between days and months.

It is one of the major company’s processes, which cannot be outsourced alone – if there is a decision about outsourcing, then the biggest part of connected processes shall be outsourced as well, which is far not always possible and expedient.

S&OP process best practices

To give you a better idea of an effective S&OP process, we provide some modern best practices:

Technologies are key to the improvement of quality of the S&OP process. It is a recurring process rather than a one-time one. So in order to avoid human mistakes, bias, and errors, it would be best to automate everything that’s possible in data collection and decision-making.

The outside-in practice: your company’s internal actions will depend on the outer influential factors such as demand change, supply chain breakage, market changes, or seasonal fluctuations. Basically, your consumer’s behavior defines what you produce and sell.

Effective leadership is a must. You cannot allow employees of your company to sabotage the planning process. It must go from inside of everyone – only in this approach, a good result will be achieved. If you push every time and don’t get the needed result, probably, you should think of changing the management approach or about the total change of employees to new ones, who would be proactive and aligned with your company’s S&OP practices.

Build a company structure that would provide a consistent and uninterrupted S&OP process. This can be a separate department or unit, the only goal of which would be to make sure the process flows on a daily basis. With their impact, operative changes to the process will also become possible. With the level of fine-tuning, which your competitors don’t provide, you can soon significantly improve your market positions even without drastic changes in the quality of your product or sales approaches.

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