Sales and Operations Planning (S&OP) is a monthly -based business process aimed at achieving a balance between a company’s overall demand and supply.
To achieve an effective, successful Sales and Operations Planning campaign both the business plan and master plan within the company have to link together.
The key to linking both plans together involves a number of elements which include:
A product review starts with a monthly proposal on new products, technologies and services. This step looks at the companies marketing initiatives and their strategic mission for the next 12 – 24 month.
The review measures the performance of recent products to make sure they are delivering ROI.
This is probably the most important aspect of the step as the purpose of operations is to supply the required products as and when they are needed. Careful planning of operations with reserve capacity, flexible working hours for production employees and the use of suppliers who can react quickly allows you to adjust production to customer demand. Failing to produce enough products can result in loss of sales while overproduction can also have huge cost implications.
Any changes you decide to mark at this point should be based on data from customer and market intelligence, product sales initiatives, programmes, promotions, new product launches, and project demand in the pipeline.
Supply chain review
The supply chain review includes manufacturing capacity, inventory, procurement, through to logistics planning. The supply review also considers potential material shortages in the supply chain and the capacity of the company to develop more business. The purpose of the supply chain review is to balance out the requirements of the demand plan and deliver products on time, at the most efficient and cost saving manner.
The amount of profit a business generates is the most important element of business success, and the cost of operations directly affects profitability. Lower costs and resulting price decreases can often allow your company to increase sales. When operations increases, production increases to meet today’s high demands.
As a result of this, businesses can usually reduce costs even further through economies of scale. More companies are saving money by renting facilities and leasing equipment, changing suppliers, eliminating costly, but unnecessary features in products and finding lower-cost materials while maintaining quality.
The management team reviews the sales and operations planning results and compares the assumptions to any underlying problems.
The best management evaluation processes use a number of leading practices such as forecasts and supply plans and the measurement of consumer demand.
Some companies find it difficult to understand the S&OP process which is why many business consultants use experts such as Gideon Hillman, to help identify areas which need improvements as part of managing demand within a business.