Henry Ford, business magnate and founder of the Ford Motor Company, once said, "Quality means doing it right when no one is looking."
If you want to create a quality product and provide an outstanding customer experience, your business processes should be fine-tuned so every step, from manufacturing to delivery, is well-executed.
Processes can be made for just about anything. And the sales and operations planning (S&OP) process is crucial to any successful business.
Let's demystify sales and operations planning (S&OP) and learn more about the S&OP process.
Sales and Operations Planning (S&OP)
Sales and operations planning (S&OP) is a business management process where leadership and executive teams meet to ensure each business function is aligned to balance supply and demand. It requires cross-organizational collaboration to create detailed forecasts for predicted sales. S&OP can occur on a monthly, yearly, or even two or three-year basis, depending on the company and its goals.
So, what's the purpose of S&OP? It's to coordinate across business units, increase transparency, balance supply and demand, and to achieve profitability.
There are some key benefits to sales and operations planning (S&OP).
Increased transparency between departments
Informed decision making about a product's demand and supply
Improved inventory management
Better sales and budget forecasting
A clear understanding of a product's lifecycle and its management
Streamlined processes that improve the overall customer experience
The S&OP process includes forecasting, demand and supply planning, and executive review. The goal is to coordinate sales and operations planning across business functions so they're all on the same page. The exact steps can vary depending on the company, its products, and its industry.
At this stage of the S&OP process, data is gathered about prior sales and forecasts are made for future sales. It's important to consider any internal and external factors that can impact sales (e.g., industry, customers, competition). Any trends will be identified and analyzed.
2. Demand Planning
Demand planning is when cross-functional collaboration comes into play. The forecasts are analyzed, and adjustments are made to inventory and customer service policies based on the product demand and sources of demand. The demand can be measured in either revenue or units of a product.
3. Supply Planning
During supply planning, representatives from finance, operations, and materials to evaluate capacity. They'll determine if there are any constraints on people, machinery, and suppliers. From there, a supply plan is created that will account for any capacity constraints.
4. Pre-S&OP Meeting
During this stage of the S&OP process, leaders from finance, sales, marketing, operations, materials, product management, and human resources meet to collaborate. They'll compare the forecasts to the demand and supply plans, and they'll consider the financial impact of the plans.
5. Executive S&OP Meeting
The final stage is when executives meet to analyze all the forecasts, plans, and recommendations from the pre-S&OP meeting. By the end of the executive S&OP meeting, a final sales and operations plan will be approved.
Here's a visual overview of what the S&OP process looks like.
Oracle provides process templates you can use to make your sales and operations planning run smoother. You can monitor each stage of the process and dashboards allow you to see KPI summary graphics. It allows you to collaborate with colleagues and assign tasks. Plus, it integrates with Excel.
The SAP Integrated Business Planning software makes your S&OP planning quick and agile. Key features include scenario planning, simulations, and advanced analytics so you can stay on top of forecasts and hit your financial targets.
With the Infor Sales and Operations Planning software, you can synchronize demand and supply imbalances, coordinate across business units, and analyze performance. It even includes predictive financial analysis so you can see how business decisions will impact the bottom line.