Sales & Operations Planning (S&OP) Basics with Steven Thacker
Why is sales and operations planning important?
S&OPs are crucial because they guide crucial resource allocation and tie together various company components. Through data-driven resource management, an S&OP compares projected demand to projected supply to increase a company’s profitability. These reports are typically produced monthly by businesses, enabling them to regularly assess and update service and cost resources to meet customer and business needs.
What is a sales and operations plan?
S&OP is a method of integrated business management that forecasts supply and demand for a company. It is typically curated monthly by various departments and the company leadership and is sometimes referred to as “aggregate planning.” The effects of the supply chain process on sales, marketing, demand management, production, inventory management, and new product introduction are examined by S&OP software. As a result, a set of procedures for balancing supply and demand, integrating financial and operational planning, and connecting high-level strategic plans with regular business operations have been developed.
An S&OP aims to create a single operating plan that controls resources across the entire organization. In order to support customer needs and maintain profitability, the plan forecasts supply chain demand and offers suggestions. Department heads compile suggestions and present them to company executives in a report.
Because they frequently have numerous employees, departments, and possibly multiple locations, large organizations that require dedicated operational planning are the ones that use S&OP software the most. Smaller businesses typically develop short- and long-term operational plans using different metrics that take less time and effort to gather.
How to create a sales and operations plan
Creating an S&OP requires frequent data collection and analysis. Follow these steps to make a useful plan:
1. Review product
Employees in research and development evaluate the first stage of the process’ product success, new product development, and any other area of product design and development that can be improved. They base their decisions on data on sales and production costs. Typically, these workers will produce a report that is part of the overall S&OP.
2. Assess demand
Teams from sales, marketing, and production collaborate to forecast potential demand for a product. They forecast how high demand will be in the upcoming month using analytics from previous and current marketing efforts and sales figures. This team produces a report for the final S&OP, just like the research and development team does.
3. Evaluate supply
Employees assess the product supply for the upcoming month using data from the production and demand teams. To determine how much more product to produce and stock, they may examine the product’s current inventory and compare it to the anticipated sales. They record these projections and recommendations for the final S&OP.
4. Analyze finances
In order to inform resource allocation to other departments, the finance team assesses the sales and costs from the previous month. A spending and revenue forecast for the company is produced at this stage of the S&OP process using data from other departments and the S&OP from the previous month. They also write this information up for the final S&OP.
5. Prepare elements
Various levels of company leadership meet to review all the data and reports generated by the research, development, sales, marketing, and production teams before creating the final S&OP report. To decide on a successful course of action for the entire organization moving forward, they use the reports and metrics.
6. Create the report
Last but not least, staff members produce a thorough report outlining the data they gathered from various departments and the judgments made in the leadership meetings. Top-level executives who decide the company’s final resource decisions will then receive the final S&OP for the month from them.
Benefits of sales and operations planning
S&OPs offer businesses a range of advantages, from improved profitability to increased company cohesion. Benefits include:
Tips for a successful sales and operations plan
The following advice will help you get the most out of your S&OP:
Provide effective leadership
Bring all departments together
The S&OP process depends on participation from all departments, including product, sales, marketing, supply operations, and finance. Lack of representation from a department may make it more difficult to provide value to customers and to perform financially. Consequences could include limited availability of materials or capacity, subpar product launches, decreased volume, and unsuccessful marketing campaigns.
Focus on what you need
While precise data is essential for a successful S&OP, only collect what you need. Even though they might be interesting to know, gathering unrelated facts could hurt the project as a whole. Work to identify the most pertinent metrics—typically 10 to 15—for evaluating the management of supply and demand needs. It’s critical that you understand the specific business issue you are attempting to solve and the bare minimum information required for the project.
Document past S&OPs
Creating a successful S&OP is a continuous process that necessitates learning from previous difficulties. You should make an effort to maintain thorough records of previous plans and to document every step of the S&OP process. They can serve as benchmarks and be essential to the long-term success of your S&OP.
What is sales and operations planning process?
Demand, supply, and financial planning are all aligned through the sales and operations planning (S&OP) process, which is managed as part of a business’ master planning. S&OP is created and implemented to assist executives in making decisions regarding the approval of a workable and profitable material and financial plan.
What comes after sales and operations planning?
People, process, and technology are the three main elements of sales and operations planning.
What is Operation plan Example?
While the re-planning process aids the management team in understanding how the company reached its current level of performance, its primary focus is on future actions and anticipated results. Changes from the previously agreed sales and operations plan are the main focus.