What Is A Sales and Operations Planning Process?
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Although a ‘sales and operations planning process’ sounds incredibly complicated, it is in fact quite a straightforward process, often abbreviated to S&OP. At heart it is very much an integrated business process used by the leaders or executive managers of an organisation to help achieve a sense of focus, of working together and when done correctly it also helps the supply chain to operate very effectively, so there is much to be said for S&OP.
The process itself requires a plan to be drawn up (after all it is a planning process). The plan is actually an umbrella plan that takes various other plans such as sales, production, stock, customer lead time, research and development as well as financial and strategic initiative plans. In other words the plan looks at all aspects of the business and what is being done and then plans for improvement.
Obviously businesses that are involved in producing goods or supplies that may have a short life or are subject to extreme variances in terms of demand, will require a very tight S&OP process because the plans will soon be out of date. Products that have a steady consumption rate can be allowed to be subject to a more relaxed S&OP process.
As part of the S&OP process demand needs to be constantly reviewed and the resources required to supply the demand need to be planned and constantly ‘re-planned’ which will help focus on the changes to any agreed goals or aspirations of the company. In a sense it is a process of learning from what has happened in the past, but simultaneously focussing on the future and what can be done, how it will be done and what the end results will be.
It is also a means whereby management of a company can see how well its strategic aims have been achieved and what action they need to take to improve the strategic performance of the company.
There are various types of S&OP approaches, from a phased approach to an outside in approach, but they basically share the same philosophy, with the nuances of how the process is implemented varying only slightly. In addition all the different approaches require data that is current and exceptionally accurate. Without accurate information any S&OP process will not be able to succeed simply because it is based on inaccurate foundations, so there has to be some good software available to ensure that the information provided is right up to date and error free.
The Benefits of S&OP
Advocates of S&OP are passionate about the benefits that the process can bring. Because it ‘unites’ a workforce into a common goal and they are all singing from the same song sheet, it is often seen as a way of ensuring that the company’s strategies are adopted throughout an organisation.
Due to its focus on the customer and customer demand, it is a means of ensuring that the customer’s needs are met and that as such customer service is improved, often quite dramatically.
In addition it assists the supply chain because it will ensure, through careful planning, that stock levels are kept to their optimum level and from a management point of view it will ensure that the planning both in terms of strategic and operational planning is fully in line with the financial aims and goals of the company.
Typically a Sales and Operational Planning process will have the output of a business plan. In many cases this will take the guise of a Master Production Schedule which will then be loaded in the company MRP system. In others it may become a documented plan that co-ordinates activity. The key thing is that the output will drive the production plan for the business until the next review (typically monthly).
So the moral of the tale is that S&OP is indeed a powerful tool that can really help to influence a company for the better and although all the planning is undoubtedly time consuming, it can leave companies in a much better position to compete in an ever competitive environment.
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