Soltius

Reinvigorating your Sales & Operations Planning Process

In the current environment, businesses need to protect their profits. Optimised sales and operation planning is one way to do this by cutting costs and retaining customers. This article by the Soltius Enterprise Architecture team gives some useful tips on how to get your planning back on track.

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You are probably familiar with the concept of sales and operation planning (S&OP) and the benefits it can provide – highly desirable benefits such as higher customer service, lower finished goods inventories and warehousing costs, reduced lead times, more stable production rates, reduced product obsolescence, and reduced freight costs to name a few.

In fact, it is possible your organisation has already implemented the process in the past. And chances are, like many companies who try S&OP, you have found that the anticipated benefits were never fully realised.

In our experience, there are a few common reasons for this. But before examining those, it’s worth briefly revisiting the four elements that make up the S&OP process.

Demand Planning: Including the development of baseline (statistical) forecasts then, if appropriate, adjusting them to reflect additional market knowledge – for example, promotions or competitor actions.

Supply Planning: The development and updating of purchasing and/or production plans, taking into consideration physical constraints such as supplier and/or plant lead-times and capacities.

Pre-S&OP Meeting: The pre-S&OP meeting is used to reconcile differences between demand and supply plans to ensure the best overall outcome for the enterprise.

S&OP Meeting: The final review and approval meeting for the integrated S&OP plan. The S&OP meeting also reviews key performance indicators, the financial impact of the S&OP plan in relation to the budget, and agrees all necessary action points and responsibilities for executing the S&OP plan.

Figure 1. Four step cycle phase.

Having established the S&OP process, companies often encounter the same fundamental problems. These can generally be attributed to a few root causes – a lack of executive support, poor meeting process discipline, and a general lack of understanding of the process and expected outputs.

But before you consign S&OP to the rubbish bin for good, here are a few tips on how to get the process back on track in your organisation.

1. Ensure that the Chief Executive fully understands and visibly supports the S&OP process. Without such commitment and leadership, the S&OP effort is almost guaranteed to fail.

2. Conduct S&OP meetings with very clear objectives and use a strict, relevant agenda. Do not allow meetings to become “finger pointing” sessions between sales and production (procurement), or forums to address operational issues unrelated to the profitable balancing of supply and demand.

3. Seriously consider formal S&OP training for all those involved. As well as educating participants in the S&OP process, the undisputable value of effective S&OP will also be understood.