Tips and insights: Sales and operations planning (S&OP)

Sales and operations planning (S&OP) is the key to balancing supply and demand. It is important to consider the following insights.

5 tips for sales and operations planning (S&OP)

  • Establish S&OP governance and management

This is the first essential step in an effective process setup. Commitment from top management is critical, not in terms of time input but in terms of support, verification and use of the outputs. Clearly defined policies and business rules around stakeholders and their roles and responsibilities, which are linked to their KPIs, will ensure ongoing commitment from all involved. It must be made clear that only information and decisions from the S&OP process will be used in the business.

  • Ensure master data is accurate and complete

Incomplete and inaccurate master data (MD) is a major underlying reason for lack of credibility in the outputs of the S&OP process. MD management requires clearly defined rules, monitoring and update processes, with a gatekeeper for any system access for additions, changes and deletions. Accurate MD impacts planning, operations, output and results monitoring. This includes information on stock keeping unit (SKU) details such as quantity, mass, size, packing, etc., and standardised or clearly defined conversion factors for units of measure at the various stages of the supply chain (SC).

  • Develop a meeting schedule for the year

A full meeting schedule for the whole year must be set up for these key meetings required for effective S&OP:

  • demand management
  • supply management
  • S&OP integration (pre-S&OP)
  • S&OP sign-off (for the acceptance and sign-off of next month’s plan by top management).

These meetings must be regular, top priority for the specified attendees, have clear objectives and agendas, be well prepared and output driven, and use agreed templates for further use by the business.

  • Establish an S&OP Office

An S&OP Office with dedicated resource(s) is essential for:

  • process and meeting coordination
  • meeting input requests to relevant people and consolidation of their information
  • meeting output documentation and consolidation
  • monitoring and instigating updates to parameters and business rules
  • general follow-ups
  • the integration of all information
  • establishing an expert user of the supporting systems.
  • Implement a supporting planning system

A successful S&OP process is completely dependent on the supporting planning system. It must be fully integrated with, or aligned to, the organisation’s ERP system (if the ERP does not have the appropriate planning capability). In organisations starting out on an S&OP process, Excel support is initially acceptable for basic operation. A key role of the S&OP Office is the running of this planning system by ensuring that:

  • MD is accurate
  • business rules and parameters are up to date
  • inputs to each meeting are accurate
  • meeting outputs are consolidated into the system.

 Indicators of potential for improvement

These operational symptoms indicate the potential for improvement in this area:

  • Customer service not meeting the required criteria
  • The need for urgent supplier orders and expensive freight options
  • Regular “firefighting” and urgent customer order expediting
  • High levels of customer back-orders
  • Sales, Marketing, Operations, Supply Chain and Finance teams working off different data sets
  • Conflicting information from disparate sources
  • Poor, inaccurate MD
  • Inadequate reporting and information
  • No S&OP meetings, or irregular attendance at S&OP meetings by all functions
  • Unclear or inadequate S&OP policies and business rules