Sales and Operations planning (S&OP)

The concept of Sales and Operations Planning (S&OP) is a month-based business process aimed at achieving a balance between a company’s overall demand and supply (availability). An effective S&OP process links together business planning and master planning within a company.

Business Planning is typically based on product families and monetary units. The annual budget process that many companies work with is strongly connected to business planning. Sales and operations planning is also often based on product families, but has physical units [Nr, Kg, Volume, etc] as a base. Sales and operations planning is a rolling plan that provides monitoring of the business plan. In the master planning process, individual items have replaced product families.

The objective of sales and operations planning (balance between demand and supply) is achieved through: 

• Focus on aggregated volumes (product families and groups) so that mix-questions (individual products and customer orders) can be handled more easily within the master planning. 
• S&OP conducted monthly, providing information both in numbers and monetary units.
• S&OP seen as cross-functional and involving management, sales, production, finance and product development departments. 
• Implementation at several levels in the company including those with executive responsibility for business units, e.g. division manager, director of subsidiary and CEO of small businesses.
• S&OP connecting the company's strategic plans and business plans for its operational processes - such as fulfilling orders, Master Planning, Detail Planning and Purchasing - which are used to run the company week-to-week, day-by-day or hour-by-hour. 
• Enabling a company's management to have a holistic view of the company and to have a window into the future.

For a company to function effectively, a balance between demand and supply is required. The balance must exist both at the aggregate level, in terms of volume, and on a detail level, in terms of product mix. Sales and operations planning is focused on volume balance and is a dimension-oriented type of planning. The mix (details) is a more transaction-oriented type of planning that handles mainly material and detailed planning. S&OP gives a company the opportunity to control resources such as plant, machinery, personnel, etc. more effectively. S&OP is performed on a monthly rolling 12-18 month horizon. The decisions taken are related to three areas:

• Determining the production plan and sales plan relative to the economic considerations
• Capacity Adjustments (temporary/permanent)
• Investment decisions

The sales & operations planning process can be described in the following five steps:

Sales and operations planning is based on three fundamentals: 

• A: People, Process and Organization
• B: A good foundation of data
• C: Application (decision support)

Modern Supply Chain Applications is a key component to an effective sales and operations planning process. Optilon collaborates with world-leading suppliers for this type of tool. 

You can read more about our offering within Supply Chain Planning or about our partner in the area, InSync.

If you want to know more about sales and operations planning (S&OP) please contact Magnus Edberg, Sales Director Optilon, +46 709 379 281, magnus.edberg@optilon.se