Sales and operations planning (S&OP) is an integrated business

management process Management process is a process of setting goals, planning and/or controlling the organising and leading the execution of any type of activity, such as: * a project (project management process) or * a process ( process management process, somet ...

through which the executive/leadership team continually achieves focus, alignment, and synchronization among all organization functions. The S&OP process includes an updated forecast that leads to a sales plan, production plan, inventory plan, customer lead time (backlog) plan, new

product development In business and engineering, new product development (NPD) covers the complete process of bringing a new product to market, renewing an existing product or introducing a product in a new market. A central aspect of NPD is product design, along w ...

plan, strategic initiative plan, and resulting

financial plan In general usage, a financial plan is a comprehensive evaluation of an individual's current pay and future financial state by using current known variables to predict future income, asset values and withdrawal plans. This often includes a bud ...

. Plan frequency and planning horizon depend on the specifics of the context. Short product life cycles and high

demand In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time. The relationship between price and quantity demand is also called the demand curve. Demand for a specific item ...

volatility require a tighter S&OP than steadily consumed products. Done well, the S&OP process also enables effective supply chain management. A company's supply chain (en)

The Sales and Operations planning process has a twofold scope. The first scope is the horizontal alignment to balance the supply and

through integration between the company departments and with suppliers and customers. The second aim is the vertical alignment amid

strategic plan Strategic planning is an organization's process of defining its strategy or direction, and making decisions on allocating its resources to attain strategic goals. It may also extend to control mechanisms for guiding the implementation of the s ...

and the operational plan of a company. A properly implemented S&OP process routinely reviews customer demand and supply resources and "re-plans" quantitatively across an agreed rolling horizon. The re-planning process focuses on changes from the previously agreed sales and operations plan; while it helps the management team to understand how the company achieved its current level of performance, its primary focus is on future actions and anticipated results.

Definitions

S&OP was born with the concept of aggregated production planning (APP) in the first part of 1950, then switched to manufacturing resource planning ( MRP 2) around 1985, till the current definition of business process for the alignment of supply and demand. The term ''S&OP'' and its modern meaning were conceived of in the 1980s and are generally attributed to Richard Ling, then a consultant with the management consulting firm Oliver Wight.

APICS APICS, currently known as the Association for Supply Chain Management is a not-for-profit international education organization offering certification programs, training tools, and networking opportunities to increase workplace performance. F ...

defines S&OP as the "function of setting the overall level of

manufacturing Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector of the economy. The term may refer to ...

output ( production plan) and other activities to best satisfy the current planned levels of

sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in ...

(sales plan and/or

forecasts Forecasting is the process of making predictions based on past and present data. Later these can be compared (resolved) against what happens. For example, a company might estimate their revenue in the next year, then compare it against the actual ...

), while meeting general business objectives of

profitability In economics, profit is the difference between the revenue that an economic entity has received from its outputs and the total cost of its inputs. It is equal to total revenue minus total cost, including both explicit and implicit costs. It i ...

productivity Productivity is the efficiency of production of goods or services expressed by some measure. Measurements of productivity are often expressed as a ratio of an aggregate output to a single input or an aggregate input used in a production proces ...

, competitive customer lead times, etc., as expressed in the overall

business plan A business plan is a formal written document containing the goals of a business, the methods for attaining those goals, and the time-frame for the achievement of the goals. It also describes the nature of the business, background information on ...

." Institute for Supply Management defines it as "working cross-functionally with internal business units to forecast anticipated demand, inventory, supply and customer lead times based on the sales forecast, actual demand and capacity forecast." One of its primary purposes is to establish production rates that will achieve management’s objective of maintaining, raising, or lowering

inventories Inventory (American English) or stock (British English) refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation. Inventory management is a discipline primarily about specifying the sha ...

or backlogs, while usually attempting to keep the

workforce The workforce or labour force is a concept referring to the pool of human beings either in employment or in unemployment. It is generally used to describe those working for a single company or industry, but can also apply to a geographic reg ...

relatively stable. It must extend through a planning horizon sufficient to plan the

labor Labour or labor may refer to: * Childbirth, the delivery of a baby * Labour (human activity), or work ** Manual labour, physical work ** Wage labour, a socioeconomic relationship between a worker and an employer ** Organized labour and the la ...

equipment Equipment most commonly refers to a set of tool A tool is an object that can extend an individual's ability to modify features of the surrounding environment or help them accomplish a particular task. Although many animals use simple tools, onl ...

, facilities, material, and finances required to accomplish the production plan. As this plan affects many company functions, it is normally prepared with information from

marketing Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to emph ...

engineering Engineering is the use of scientific principles to design and build machines, structures, and other items, including bridges, tunnels, roads, vehicles, and buildings. The discipline of engineering encompasses a broad range of more speciali ...

, finance,

material Material is a substance or mixture of substances that constitutes an object. Materials can be pure or impure, living or non-living matter. Materials can be classified on the basis of their physical and chemical properties, or on their geolo ...

s, etc." It has also been described as "a set of decision-making processes to balance demand and supply, to integrate

ning and operational planning, and to link high-level

s with day-to-day operations."

Planning process

S&OP is the result of planning activities and it is composed of 5 main steps: data gathering, demand planning, supply planning, pre-meeting and executive meeting with the additional of a preliminary step at the beginning (event plans), two additional steps at the end of the process in case of a

multinational company A multinational company (MNC), also referred to as a multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation or a stateless corporation with subtle but contrasting senses, i ...

(global roll-up and global executive meeting) and a critical revision step as conclusive step of the S&OP cycle. File:Monthly S&OP Process.jpg, A cycle of S&OP Process It is a tactical

process A process is a series or set of activities that interact to produce a result; it may occur once-only or be recurrent or periodic. Things called a process include: Business and management *Business process, activities that produce a specific se ...

with a planning horizon which covers up to 18 months, at product family level (or sku) and it is performed generally every month (or driven by events in case it is used as a tool to respond quickly to the uncertainty of the context).

Inputs to S&OP

The inputs are related to the plans from the different departments involved in S&OP, including constraints and goals. The inputs could be: demand plans, sales/demand forecasts, demand impacts,

actions and sales actions,

procurement Procurement is the method of discovering and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. When a government agency buys goods or serv ...

and supply plan, supplier lead time, constraints from the supplier and other information, supply capacity, production and capacity plan, Inventory, work-force level, operational constraints, production lead time, flexibility, contingencies, distribution plan and distribution capacity, lead time for the delivery, transportation status, service level targets, constraints, budgets.

Output of S&OP

The main output from S&OP is the integration of the plans of Marketing, Sales, Operations and Finance. The integration of plans is allowed by the cross- functional integration fostered by S&OP. The integration is different from coordination: in fact, it takes in consideration the target while the coordination takes it for granted. To achieve the integration the main precursors are: informational quality (it’s important that the information for the decisions is appropriate in terms of content and in the form), procedural quality (the rules at stake are clear for all the departments involved), alignment quality (the synchronization of the goals and the actions which gives to the company a best image to the eye of the customers, suppliers, stakeholder), constructive engagement (the participants are proactive in the process and defend their interests. A high level of constructive engagement leads to greater level of S&OP

effectiveness Effectiveness is the capability of producing a desired result or the ability to produce desired output. When something is deemed effective, it means it has an intended or expected outcome, or produces a deep, vivid impression. Etymology The ori ...

Goals of S&OP

The goals of S&OP could be classified in these categories: alignment and integration, operational improvement (improvement of the operational performance, improve forecast accuracy), results focused on a single perspective (for instance, improve supply chain performance, improve customer service), results based on trade off (for example, optimize customer service versus inventory), end results (such as gross profit, contribution margins).

Implementation

The implementation is driven by the means of maturity model of S&OP. There are different maturity models proposed in the literature in function of the type and number of dimensions (mechanisms) considered and the type and number stages of evolvement. The role of these models is three-fold: descriptive for the implementation, prescriptive (to understand which is the current state and which are the following stage to be reached), comparative (to benchmark the maturity stage of the company versus the competitors). A maturity model, suggested in the academic literature, is composed by five dimensions and five stages. The five dimensions are related to:

meetings A meeting is when two or more people come together to discuss one or more topics, often in a formal or business setting, but meetings also occur in a variety of other environments. Meetings can be used as form of group decision making. Defin ...

and collaboration, organization, measurement,

information technology Information technology (IT) is the use of computers to create, process, store, retrieve, and exchange all kinds of Data (computing), data . and information. IT forms part of information and communications technology (ICT). An information te ...

and S&OP plan integration. The stages, along with these dimensions evolved, are: no S&OP process (stage 1), reactive (stage 2), standard (stage 3), advanced (stage 4), proactive (stage 5). There is another maturity model which suggests four dimensions and six stages of evolution. The dimensions are: process effectiveness (in terms on how the right things are doing for S&OP), process efficiency (how the things are doing right with minimum effort), people and organization and information technology. The stages of evolution are: undeveloped (level zero), rudimentary (level one), reactive (level two), consistent (level three), integrated (level four), proactive (level five).

Enablers and barriers

In the literature are pinpointed, not just for the implementation, but also during the conducting of the process, several enablers and barriers. The main enablers are the following: the capacity to learn from previous mistakes, the ability to make changes, the discipline, the existence of an S&OP department, the top management support, the cross-functional integration, the performance evaluation, the information system, the

training Training is teaching, or developing in oneself or others, any skills and knowledge or fitness that relate to specific useful competencies. Training has specific goals of improving one's capability, capacity, productivity and performance. I ...

on S&OP, the commitment of participants, well assigned roles and responsibilities, impartiality in the conducting of the process.The main barriers indicated are: the presence of siloed culture, inadequate information technology, lack of participation or irregular attendance at meetings, difficulty to reach a joint decision during the meetings.

References

External links

* * * {{cite web, url=http://www.stratabridge.com/2011/09/joined-up-decision-making-whats-your-perspective/, title=What's Your Perspective?, year=2011, access-date=2015-09-17, archive-date=2017-12-29, archive-url=https://web.archive.org/web/20171229015119/http://www.stratabridge.com/2011/09/joined-up-decision-making-whats-your-perspective/, url-status=dead An article outlining the different perspectives that should be considered when designing an S&OP process A series of papers authored by Dr. Larry Lapide of the MIT Center for Transportation and Logistics:
Sales and Operations Planning Part I: The Process

Sales and Operations Planning Part II: Enabling Technology

Sales and Operations Planning Part III: A Diagnostics Model
A series of practical papers authored by Robin Goodfellow and Ian Henderson of MLG Management Consultants:

* ttp://www.mlg.uk.com/html/mlg_papers.htm Brief article on the need for and ways to succeed with S&OP A series of infographic images authored by Jay Sharma of SupplyChainPro Consultants:
An Infographic of an example agenda in a S&OP Meeting

An Infographic of a S&OP Maturity Model detailing key elements of different S&OP phases

An Infographic of the key planning elements within S&OP and their inter-relationships

An Infographic on key questions to address before a company implements S&OP

An Infographic depicting key areas related to culture change for supporting S&OP
Supply chain management Sales Production planning