Sales and operations planning (S&OP) refers to a procedure for matching a manufacturer’s supply with demand by having the sales staff involved to create a single production plan. In short, the main goal is to align daily operations with corporate strategy, not always an easy thing.
Oliver Wright, a pioneer in the field of S&OP, tells Kinaxis it’s a senior management decision-making process that ensures that the tactical plans in all business functions are aligned and support the business plan.
In other words, Wright said, S&OP is about piloting your daily operations and monthly plans toward your long-term business goals. It’s about getting everyone headed in the same direction, including your contract manufacturers, suppliers, distribution partners and customers, he added.
Dealing with S&OP Issues
Lack of S&OP is a challenge for many recently established businesses, businesses that are still trying to keep themselves afloat and don’t have time to worry about business theories. It often takes more than just foresight to revitalize a failing S&OP, says Jonathon Karelse of NorthFind Partners. As companies move up the supply chain, Jonathon Karelse notes, complexity grows and transparency declines, resulting in many organizations becoming trapped, and unable to identify root causes of their setbacks.
The Monthly S&OP Meeting
In most companies, the monthly S&OP meeting brings executives from all major departments (such as sales, marketing, manufacturing and finance) together to determine how best to manage company resources. Such meetings are key in determining the direction of the company.
However, such meetings cannot take place without input from department heads. The S&OP team must have up-to-date information on things like demand, production capabilities, inventory status, limitations on resource availability such as warehouse space and transportation capacity.
An S&OP meeting typically includes the following tasks, according to a Logility article:
- Innovation and Strategy review
- Demand Planning review
- Supply Planning review
- Financial Integration
- Executive Business review
With the right information, the S&OP team can then make a decision based on a full understand of the range of considerations available and make difficult choices that ultimately depend on how well the company performs.
S&OP grew out of a need to balance supply and demand but now looks for a way for company senior staff to work together and reach a consensus on the best business plan and how to execute it.