Sales and Operation Planning (S&OP) is an integrated business management process through which c-suites and leadership teams manage end-to-end supply chain functions. S&OP ensures that each business function is aligned to a balanced supply and demand.
S&OP provides important visibility into the critical interactions between Sales, Marketing, Production, and Finance. S&OP can occur on a monthly, yearly, or even two- or three-year basis, depending on the company and its goals.
Basic Processes in Sales and Operation Planning
5 Benefits of S&OP
- True Visibility: It provides visibility into critical interactions between Sales, Marketing, Production, and Finance.
- Increased Forecast accuracy: Better data and collaboration between departments facilitates frequent adjustments in the supply chain, which helps balance supply and demand.
- Improved Inventory Management: Sales and Operation plan maximizes inventory usage by minimizing organizational slack. Excess inventory, poor customer service, excess capacity, long lead times, panicked operations, and poor response to new opportunities are eliminated.
- Number Plans: One of the key benefits of S&OP is being able to run organization to one set of numbers, where there is continuous synchronization between marketing, manufacturing and financial team to agree on expected sales.
- No-Cross Functional Engagement: S&OP reduces the quantity of communication and increases real-time communication between manufacturing and sales regarding demand and supply. Sales inputs revenues by account, operations needs demand in units by product, and finance calculates net margin.
Importance of S&OP
Some companies rely on spreadsheet models to collect crucial information. S&OP software is capable of leveraging automated data mining and reporting for immediate analysis and provide crucial data to manufacturing and supply chain teams. Transformation of manual data entry to a real-time software solution reduces human-error. Centralized visibility of information allows the organization to maximize the utilization of resources.
Forecasting is still the major pain point for manufacturing, supply chain or freight forwarder in order to predict demand. S&OP continuously allows the organization to make proactive strategies by analyzing data along with the real-time capacity to manage future inventory and supply to meet market demands.
Sales & operation planning solutions can provide a quick clarification about the numbers and benchmarks to achieve across functional groups. It can also increase communication and analyze potential pain points such as pricing and cost data, marketing plans, and financial targets by collaboration throughout the supply stream.
Common Challenges of S&OP
- Accurate Forecasting
- Effective Assessments Planning
- Interpretation of Information and Data Analyze
- No Cross-Functional Engagement
- Robust, Flexible Technology
- Real-time planning for execution
S&OP offers business integration and a new approach beyond tactical supply chain boundaries. S&OP uses organizational information to drive the right product, and optimize place, time, quantity, cost and business performance. It provides better-integrated communication, operational coordination, and cross-functional collaboration.
With the help of the S&OP, organizations can quickly analyze organization sales and inventory plans with real-time demand from Demand forecasting and other forecasting approaches. S&OP can provide a unified view of enterprise inventory for accurately fulfilling customer demand and using the plant capacity.