Creating a Sales and Operating Plan (S&OP) puts you and your team on the road to higher profits and reduced waste by balancing the business’ bottom line; supply and demand.
Failure to put an S&OP plan in place causes problems you may be experiencing now or want to prevent in the future.
A solid S&OP helps you work out of negative business situations. For example, if your company enjoys a firm financial footing, the S&OP will mitigate future missteps preventing high overhead and low customer satisfaction.
Before covering the six phases of putting an S&OP in place and then into action, it’s essential to understand why a quality S&OP is beneficial for business.
Value added by putting a solid Sales and Operating Plan in place:
- The plan includes valuable details so executives can make well-informed decisions regarding any product’s supply and demand
- People from different departments come to understand the needs and challenges of their colleagues, which presents opportunities for more cooperative and productive work
- Reveals a clear picture of the lifecycle of any product combined with who manages each step along the way
- Builds an improved system for inventory management
- Causes better forecasting results in both budget and sales
- Ultimately maps a smoother, tighter process to improve the overall customer experience
Working through the phases of creating an S&OP helps you fine-tune your entire business management process from manufacturing and ordering through delivery.
Members of the company’s executive leadership team map out each business function with the goal of higher profits and repeat business by balancing supply and demand.
Six Phases of Creating an S&OP:
- Forecasting
Gathering data about the previous year’s sales and recent forecasts to review. - Demand Planning
Collaboration is essential, coming up with a common goal, analyzing forecasts, and spelling out necessary adjustments to ensure the availability of in-demand inventory. - Supply planning
Leaders from divisions, including finance, operations, and materials, evaluate current capacity and identify gaps, whether employees, equipment, supplies, or some combination. Within the S&OP, any potential problems should be identified and flagged for further oversight. - Pre-S&OP meeting
The supply planning team adds the executives who lead other departments, including sales, marketing, operations, materials, product management, and human resources into the mix. People from all divisions should collaborate and compare forecasts for both supply and demand.
- Executive S&OP meeting
Now you dive deeper to analyze all forecasts, plans, and departmental recommendations from the pre-S&OP meeting. The goal of the executive meeting is to create and gain approval for the final sales and operations plan. - Finalize and implement S&OP
Put the S&OP into action and set dates at regular intervals to evaluate how well the plan works and what needs improvement.
During evaluations stay open to making tweaks to correct and improve the plan. It’s not a static, untouchable guide; it’s a living, evolving part of the company.
The key to maintaining supply and demand balance is the combination of two separate but co-dependent mechanisms; Volumetric Planning and Mix Scheduling. You’ll need to onboard both to apply the ten S&OP Principles for success.
