Sales and Operations Planning (S&OP) provides the managerial framework to manage the supply, demand, inventory and financial plans of a successful business. It can unlock the sometimes-stubborn door towards profit improvements, returns on assets, and a smoother, more effective customer service model. S&OP gives a business the ability to determine and effectively decide on the correct products, quantities, and overall performances. When problems inevitably arise in your business (such as production, yield, lack of demand for your product, etc.), S&OP allows you to effectively manage those problems, and if done correctly, can result in a competitive advantage.
The driving point behind an effective S&OP is taking a non-siloed approach. A siloed approach is having the various aspects of your company working individually to achieve the company’s common goal. Rather, it is important to have a process in your company that brings together the respective chairs (sales, marketing, development, finance, manufacturing, etc.). When the respective chairs work together as one, it helps develop and execute a more cohesive plan that matches the strategic goals of the company. Keep in mind, this is a continuous process that must consistently be created, edited and maintained.
Taking a non-siloed approach is also applicable to the employees. It is important to educate the employees of a company on the workings of their S&OP platform, clarify one’s role in the platform, and ensure a mutual understanding across all bases. There are four components necessary to establish an effective S&OP team:
An Executive Sponsorship
This is critical for developing a relationship between both managers and sales and operations leaders.
Involve All Aspects of the Business
The more business functions that are involved, the better.
Decision Making Empowerment
Employees involved in the S&OP process need to feel empowered to make decisions involving plans and forecasts.
Focused Teams
The S&OP process needs to execute a consistently repeating agenda. The planners working within the framework need to be given the space and tools to ensure the work gets done.
Each plan in the S&OP framework needs to be sponsored by the corresponding functional heads. These include leads in sales, marketing, manufacturing, product development, and finance. It is regularly important to eliminate the siloes! Collaboration among the functional heads is crucial. The S&OP framework establishes a series of collaborative meetings. Typically the sequence includes:
Product Plan
Define which products are going to phase in and which products are going to phase out.
Demand Plan
This includes the collaborative forecast and promotional planning. It is important to incorporate assumed changes induced by the product plan and include actions to deal with excess inventory.
Supply Planning
Respond to the demand plan. The supply team creates requirements to satisfy the demand.
- Purchase Planning
- Production Planning
- Transportation Planning
- Inventory Planning
Financial Planning
All companies have financial constraints. Where the above plans don’t fit into the constraints, the teams need to amend their plans.
Plan Rationalization
Each of the plan leads need to come together to work through constraints and problem solve.
It is important to define the scopes of operations for each of the teams. Who is in charge of regional responsibilities? What about global responsibilities? Realistically, an S&OP team can manage no more than 12 product families. It is important to note that these various families should proportionally impact cost, revenue, production capabilities, and supplier capacities.
The implementation of an S&OP solution in a business requires a phased in approach. The first step is to identify data sources and verify the integrity of said data. Important data sets to account for include sales and production history, historic and present inventory levels, forecasts, and production schedules and plans. It is important to use the right software to log data. Today, many food related companies use an Enterprise Resource Planning (ERP) software. However, ERP has its limitations and downsides. ERP provides a good foundation for planning, but lacks organizational framework. To get value out of an ERP solution, an additional integrated S&OP solution may be required to support a more robust S&OP process. This is possible through Outperform Planning software. Outperform Planning is easy to use and provides accurate, real time data that helps to improve customer service and get rid of stubborn inventory that is just sitting in a warehouse.
Once a company has its data compiled, it is then necessary to establish policies concerning objectives, schedules, and responsibilities. Implementation is only ready after a careful analysis of the parameters set by the company. This final step includes much of what we talked about earlier, for example: formalizing teams, solidifying those product families, educating workers on the new process, formalizing an agenda, preparing pilot data, and facilitating initial meetings. The program can be plagued by hiccups and rarely succeeds when the people of a company are neglected in the S&OP process. The success of the S&OP for a business ultimately relies on the people who create it.