Unquestionably, Sales and Operations Planning (S&OP) enables companies worldwide to integrate and align business strategies. It is designed as a solution for tactical issues and provides an overview of what it takes to be more successful.

S&OP has primarily developed as a Supply Chain competence, integrated through groups of planners or people related to the Supply Chain framework. It is extensively discussed in the Supply Chain community but is not as widely embraced in other business areas. Leaders currently focusing on S&OP are primarily operations, logistics, or Supply Chain practitioners.

This article discusses why S&OP should be more integrated into the wider business; why it should be made a way of life across all departments and functions.

What is Sales & Operations Planning?

S&OP is a (planning) process that looks to drive greater alignment between finance and the Supply Chain. However, this is not a constraint of S&OP. Other key functions of the business also feed into the S&OP process, including sales, marketing, operations, and so on. When at its most effective, the outcome is a cross-functional, collaborative, and unified plan for the entire business to understand, support, and execute.

With its roots largely in Supply Chain planning activities, S&OP can prove a widely practical approach to establishing a more intelligent plan. It:

• Connects sales with requirements planning to operations and beyond: This enables business cohesion and synchronized decision-making. Through change management and a culture of continuous improvement, S&OP moves companies to the next level through people, processes, and technology.
• Integrates resource management and financial integration, customer demand management, and supplier requirements management: This helps generate feasible supply plans and adaptive product portfolio management – enhancing the holistic enterprise perspective.
• Gives directors the power to manage their business to accomplish a sustainable, achievable viable business benefit: The primary purpose of S&OP is to help deal with and assign significant resources to fulfill the customers’ demands at the most effective cost.

Successful S&OP is a flexible commitment to meet organizational demands by synchronizing the Supply Chain at all tiers. Possessing this digital visibility empowers fulfillment and enables end-to-end requirements to be underwritten, ensuring customers and stakeholders receive the best value.

The process consists of informed projection leading to production, inventory, procurement, and sales plans while avoiding unnecessary bottlenecks. S&OP facilitates innovative product development and underpins a creative strategy plan.

How to improve S&OP

S&OP has become an approach everybody is talking about, but few know well. To operate more efficiently and enrich the intelligent planning process, S&OP technology and capability will incorporate:

• portfolio management
• demand management through demand shaping and sensing
• inventory planning
• production planning
• supplier management

It will then utilize the power of scenario development, simulation, and collaboration to build a better plan.

It must extend beyond silos and participate with others in key roles and regulatory positions to add value and maintain its significance. A good starting point to find where to integrate S&OP is to look at the main outputs from an advanced S&OP process.

To this end, it delivers four main results:

1. S&OP provides a viable operational forecast to form the budget’s starting point: This provides executives with the basis for realistic Profit and Loss (P&L), cash flow, working capital, gaps in funding, and scenarios on business risks and opportunities across the most crucial P&L lines. Finance and Supply Chain leverages financial perspectives and feasible insights.
2. S&OP plays a principal role in connecting strategy with execution: Checking against the strategic intention, S&OP adapts ongoing plans to shape and respond to market changes within the budget plan horizon.
3. S&OP enables efficient resource distribution: Modifies the workforce or resources required for business-as-usual operations, budget adaptions, or strategic initiatives – allowing bosses to re-allocate resources where they enhance most value.
4. S&OP establishes a benchmark to measure performance: Underpinning a well-defined communication strategy and allowing managers to focus on helping people to make the plan happen.

Operating and communicating an enterprise S&OP strategy ensures the right stakeholders are empowered with the latest agreed plan through the right channel at the right time and ensures staff is committed to successfully synchronizing resource provision, budget, and strategy. To achieve these goals, businesses undergo significant transformation, leverage transparency, and enhance cross-departmental performance.

According to experts, a preliminary S&OP change program will take 5-10 years to mature. A focus on sustainable S&OP enables the strategy to be developed, for leadership to deliver, and for company culture to be driven through the development of clear vision, values, and behaviors.

However, to improve S&OP further, the team must start developing, participating, and understanding the business disciplines of strategy, finance, culture, and communication. Successful S&OP allows aligning an informed ecosystem from supplier to customer.

Why implement Sales and Operation Planning?

S&OP is a business process connecting the organization’s strategic plan to daily operations. It helps deliver better management of the overall business, more stable and reliable production rates, lower inventory, predictable lead times, more stable production rates, and better customer service.

One significant benefit is that it offers a crucial communication mechanism for senior management to efficiently ensure the diverse planning stages in a company process. The main goal is to design an overall business process that effectively combines all operational planning actions.

The key questions then are:

• Is your S&OP process a way of life in your business?
• Is it living up to its full potential?

Learn how to improve collaboration in Sales & Operations Planning and enhance finance and Supply Chain planning by downloading our Board-sponsored report: Improving Financial and Supply Chain Alignment.