Sales & operations planning
Tip the scales in your favour with effective sales & operations planning
The objective of your company is to operate at a level that maximises profitability. To achieve this, you have to find a balance between supply and demand. If the supply is too high, you will end up with unwanted product, potentially creating unnecessary losses. If the demand is higher than the supply, you might end up losing potential customers. Sales & operations planning (S&OP) comprises of a set of decision-making processes aimed at balancing demand and supply, while integrating financial planning and operational planning and linking high level strategic plans with day-to-day operations.
S&OP is the result of monthly planning activities. It is an integrated business management process that allows you to achieve alignment and focus among all the functions of your company. An updated sales plan, production plan, inventory plan, customer lead time (backlog) plan, new product development plan, strategic initiative plan and resulting financial plan should all be included in your monthly S&OP plan. If executed thoroughly, it should also naturally enable effective supply chain management.
In order to be effective, the S&OP process should routinely review customer demand and match this with the supply resources to facilitate a balance. This includes the labor, equipment, facilities, material and finances required to accomplish the required production. It should simultaneously ensure that the general business objectives of profitability, productivity, competitive customer lead times, etc. are met as expressed in the overall business plan.
Challenges faced in this process include the quantity and diversity of demand inputs, variations between different input sources and hindered collaboration between collection and sharing mediums. There is also a lack in verification of forecasts against other input sources, the inability to connect the extended supply chain information to demand inputs and a limited ability to simulate different plan alternatives and compare to key business objectives.
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