Sales and operations planning or S&OP is an integrated business management process, where the leadership team continually works to achieve focus, alignment and synchronization among all functions of their organisation.
S & OP includes an updated forecast that leads to multiple plans including:
- sales plan
- production plan
- inventory plan
- customer lead time plan
- new product development plan
- strategic initiative plan
- financial plan
Plan frequency and planning horizon depend on the specifics of the industry. Short product life cycles and high demand volatility require a tighter sales and operations planning than steadily consumed products. Done well, the S & OP process also enables effective supply chain management.
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. Companies that have an integrated business management process use the S & OP process to monitor the execution of the company’s strategies.
S & OP best practices
Sales and operations planning best practices share a common set of approaches:
- Rely on a phased approach: S & OP is much more an integrated set of business processes and technologies than a single, all-encompassing process or technology.
- Develop an “outside-in” sequence of S & OP initiatives: typically, the events that will have the most profound and negative impact on your sales and operations planning are those outside of your control. For the most part, these are due to the decisions and actions of your customers, partners, and competitors, which have a direct impact on your revenue and your competitor’s strategy.
- Focus on more information, less data: another key to successful S & OP is clean, current, and accurate data. Plans are often slowed down by the effort of gathering data that has minimal importance to the overall project. It is important to ensure that you know exactly what business problem you are trying to resolve and understand the minimum data necessary for the project.
- Provide effective leadership for the process: S & OP crosses organisational boundaries - that is its strength but also its vulnerability. Many businesses find that their attempts to implement S & OP are frustrated by internal tensions between departments. Classic best practice suggests that sales and operations planning must "belong" to the Chief Executive Officer. If that's not possible then a strong united coalition of department heads may be able to lead the process if they set clear ground rules and boundaries for working together.
Creating an integrated sales and operations plan
Total Logistics are experts in S & OP and can help you create an integrated sales and operations plan that will give you greater business agility, enabling you to reconcile supply and demand plans and determine your supply chain requirements over short, medium and long term horizons.
For more information visit http://www.total-logistics.eu.com