S&OP: A Comprehensive Overview of Sales and Operations Planning

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Meredith Hart
Meredith Hart


To create a quality product and provide an outstanding customer experience, your business processes must be fine-tuned. Every step — from manufacturing to delivery — should be well-executed.

S&OP planning meeting

That’s why sales and operations planning, or S&OP, is important. It aligns demand, supply, and financial planning, helping you make the best decisions for your business.

Let's demystify sales and operations planning (S&OP) and learn more about the S&OP process.

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Table of Contents

The purpose of S&OP is to coordinate across business units, increase transparency, balance supply and demand, and achieve profitability. S&OP can occur monthly, yearly, or even on a two- or three-year basis, depending on the company and its goals.

Here are some key benefits of 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 enhance 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.

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    1. Forecasting

    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 impacting 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. Then, 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 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. Then, they’ll consider the plan's financial impact.

    5. Executive S&OP Meeting

    In this stage, 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.

    6. Finalize and Implement

    Once the sales and operations plan has been approved, it is time for implementation. After implementation, the S&OP should be evaluated regularly to ensure success.

    Sales and Operations Planning Process

    sales and operations planning process

    S&OP Metrics

    When evaluating your S&OP process, there are some key metrics you can use to gauge performance.

    Demand and Supply S&OP Metrics

    Demand and supply metrics will help you determine if your forecasts are accurate and if the demand matches the supply.

    • Demand forecast versus actual
    • Production forecast versus actual
    • Inventory turnover
    • Capacity utilization
    • On-time delivery
    • Accuracy in order delivery
    • Cycle times

    Financial S&OP Metrics

    These metrics show you how the business is performing from a financial perspective.

    • Total sales in a period (e.g., month, quarter, year)
    • Total sales versus forecast
    • Gross margin
    • Working capital versus plan

    Free Sales Plan Template

    Outline your company's sales strategy in one simple, coherent sales plan.

    • Target Market
    • Prospecting Strategy
    • Budget
    • Goals
    Learn more

      Download Free

      All fields are required.

      You're all set!

      Click this link to access this resource at any time.

      Top S&OP Software to Use

      Which tools should you use for your sales and operations planning? Instead of solely relying on spreadsheets, here are some software options to streamline your S&OP.

      1. Oracle S&OP Cloud

      Oracle S&OP Cloud

      Pricing: Available upon request.

      Best for: Large-scale businesses.

      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. This allows you to collaborate with colleagues and assign tasks.

      Plus, it integrates with Excel.

      Pro tip: Oracle S&OP Cloud is tailored primarily toward larger businesses. It includes features that suit the needs of enterprise-level customers. That includes social collaboration resources, accommodations for organizations with several users, and aggregate planning capabilities.

      2. SAP Integrated Business Planning

      SAP Integrated Business Planning

      Pricing: Available upon request.

      Best for: Those who need a multifaceted solution, extending beyond S&OP for supply chain planning.

      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.

      SAP Integrated Business Planning contains resources that allow for effective sales and operations planning, but the solution's capabilities extend well beyond the practice.

      What we love: This tool combines S&OP, forecasting and demand, response and supply, demand-driven replenishment, and inventory planning to ensure business continuity through supply chain disruption.

      3. Infor Sales and Operations Planning

      Infor Sales and Operations PlanningPricing: Available upon request.

      Best for: Businesses looking for an accessible interface.

      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.

      Infor S&OP‘s user interface’s ease of use is one of the software‘s biggest draws. You don’t need to be an IT specialist to leverage it — allowing users closer to your sales and operations planning to manage and keep tabs on the process.

      What we love: If you want a straightforward solution that keeps things simple without sacrificing functionality, look into Infor's sales and operations planning resources.

      4. Vanguard IBP S&OP by Wolters Kluwer

      Vanguard IBP S&OP by Wolters KluwerPricing: Available upon request.

      Best for: Businesses interested in a collaborative solution.

      Vanguard Predictive Planning is an excellent resource for any organization trying to support its S&OP infrastructure with an AI-based, end-to-end impact analysis solution.

      Vanguard can provide your business with a comprehensive overview of your sales, demand, supply, and production to inform accurate, constraint-based plans — among a wide array of other features and benefits.

      One aspect of Vanguard IBP S&OP is its resources for collaboration across all facets of your sales and operations planning. The platform includes business intelligence software that enables end-users to create their own charts, reports, and dashboards.

      What we love: Vanguard Predictive Planning offers automated, easily adjustable workflows, visible scenario modeling, cross-department insights, and other features that foster collaboration between sales, operations, and finance.

      5. Kinaxis Rapid Response S&OP

      Kinaxis Rapid Response S&OPPricing: Available upon request.

      Best for: Businesses looking for solid out-of-the-box features.

      Kinaxis Rapid Response S&OP is a sales and operations planning solution that can help you improve business outcomes, take more centralized control of your S&OP, reduce costs in supply chain planning, foster collaboration, and generally increase efficiency throughout the S&OP process.

      While Kinaxis Rapid Response S&OP does feature some degree of customization, it differentiates itself from the competition with its standard features.

      What we love: Its out-of-the-box dashboards can help you accurately gauge performance immediately — with features accounting for revenue value, ending inventory value, margin percentage, and other key S&OP performance indicators.

      Myths About S&OP

      There are many myths about sales and operations planning. Here are some of those myths and why they aren’t true.

      1. S&OP is not necessary for organizational growth.

      Because S&OP doesn’t immediately drive leads and revenue for a business, it’s easy to think that it’s not integral to the growth of a business. On the contrary, S&OP is a management process that can help businesses of all sizes — from small startups to huge enterprises — achieve their business goals, outpace their competitors, and ensure continued success.

      S&OP helps businesses gain better visibility into the supply chain, predict market changes, and make business decisions before the product reaches the customers. This way, they can match the market demand with adequate supply and generate as much revenue as possible.

      2. S&OP is just a review of historical data.

      While historical data is critical for benchmarking and analyzing past business decisions, it shouldn’t be the main focus of S&OP. Instead, effective S&OP processes should leverage past data to make predictions about future demand and gauge their ability to meet that demand through product innovation and stellar marketing.

      Businesses should also ensure that they can provide great customer service to match the demand, and executives must make business decisions that they can afford to put into motion and generate profits from. These precautions can help businesses prepare themselves to adapt to rapid market changes and stay competitive in the long term.

      3. Spreadsheets are just as effective as S&OP systems.

      Many people believe that spreadsheets are the most effective and cheapest tool for S&OP — and that they should be used in place for actual S&OP systems. This couldn’t be further from the truth.

      While spreadsheets are great for documenting data and making the case for an S&OP process, using them for supply chain planning is not feasible. Not only is spreadsheet-based planning time-consuming, but it opens up room for many errors and cannot scale alongside rapid business growth.

      If you’re a fast-growing business, you’re better off using a purpose-built S&OP system that’ll show you real-time analytics and allow you to respond quickly to changes as they occur.

      Free Sales Plan Template

      Outline your company's sales strategy in one simple, coherent sales plan.

      • Target Market
      • Prospecting Strategy
      • Budget
      • Goals
      Learn more

        Download Free

        All fields are required.

        You're all set!

        Click this link to access this resource at any time.

        4. S&OP processes are difficult to manage.

        The only way supply chains can be truly effective in today’s economy is when businesses collaborate closely with their trading partners.

        When a company incorporates trader partner insights into its processes, the company’s credibility, as well as that of its executives, will increase, especially when their performance exceeds planning assumptions.

        Thankfully, the advent of technology makes it much easier to effectively integrate trading partner insights into S&OP processes, which leads to better demand stream visibility, satisfied customers, and healthier profit margins.

        5. S&OP is rigid and unchanging.

        This particular myth stems from a misconception that an S&OP process can only be successful if it follows the standard 5-step process: product, demand, supply, financial, and executive reviews. In truth, an S&OP doesn’t have a fixed process that’ll guarantee great results for all companies or industries.

        Companies need a flexible S&OP process to predict, plan for and manage changes in market conditions. This means that each company has to tailor its S&OP process to conform to its unique business structure.

        Sales and Operations Planning Best Practices

        1. Have executive ownership of your S&OP.

        Successful sales and operations planning takes a certain degree of guidance and direction. With S&OP, you‘re essentially trying to facilitate cohesion between conflicting elements of your business — that’s not a responsibility that can be vaguely managed without clearly defined and engaged leadership.

        The practice requires firm and active executive ownership — typically from someone like a CEO or general manager.

        There's bound to be some kind of tension between the supply and demand sides of your organization, so you need a central figure ensuring that there are definitive, understood, and consistently enforced standards for how both parties will work with one another.

        2. Keep things simple.

        Companies conducting S&OP have tended to trip themselves up by overcomplicating the process — most notably when it comes to metrics.

        If you try to keep tabs on too many factors between the supply and demand sides of your business, your planning might wind up being inefficient, and the visibility you're trying to maintain between departments could be clouded.

        Instead of trying to measure everything you can think of, determine the most meaningful, relevant metrics for gauging how both sides of your business are working together — whether that be measurements of how forecasts are stacking up to actual sales figures, inventory turnover, or any particularly pertinent indicators of how sales and operations are interacting.

        Try to keep the number of metrics you‘re tracking between 10 and 15 — make those choices count, and don’t let this side of the process get away from you.

        3. Maintain records.

        Successful sales and operations planning is an ongoing process. It leans, in large part, on your ability to learn from your previous hitches and hiccups. That's why you need to keep detailed records of your previous plans and processes.

        Document most — if not all — aspects of your S&OP efforts. Those reference points can be central to your planning's sustained success.

        4. Stress cross-functional engagement.

        Cross-organizational collaboration is at the core of any and all sales and operations planning. Stakeholders from every impacted facet of the business need to be included and involved in the process.

        Your sales and operations planning won‘t be particularly helpful or productive if you’re only considering your sales org's contributions and interests while ignoring other departments like operations and finance.

        S&OP rests on your ability to foster cohesion through visibility. Every party involved needs to have a clear understanding of how the others are performing and where they're coming from.

        That information needs to flow freely between stakeholders. If you want to get the most out of your sales and operations planning, you need to keep everyone in the loop and stress cross-functional engagement.

        Incorporating S&OP Processes Into Your Business

        Over the years, sales and operations planning has evolved from a simple demand-supply alignment process into an advanced business management process that streamlines business functions and enables companies to correctly predict market trends and make the best decisions about their product development.

        With sales and operations planning, you can keep virtually every aspect of your company on the same page — allowing for a smoother functioning, more cohesive organization.

        Editor's note: This post was originally published in October 2020 and has been updated for comprehensiveness.

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