Supply Demand Chain Exec: Article on Next-Generation Sales and Operations Planning

Next-Generation Sales and Operations Planning: Tracking the Evolution from Tactical to Strategic Operational Excellence

A look at how progressive companies are taking a strategic, best practices-based approach to S&OP to enhance operations with increased visibility, reduction of costs andNext-Generation Sales and Operations Planning: Tracking the Evolution from Tactical to Strategic Operational Excellence improved business performance.

By Fred Baumann

The concept of sales and operations planning (S&OP) has been around for decades, primarily as a collaborative supply chain planning process designed to drive more accurate demand forecasts and align that demand with production capabilities to ensure timely fulfillment of customer orders. Many manufacturers still adhere to that view. Today, however, as companies face increased global competition and supply chain challenges, along with rising transportation costs and volatile economic and market conditions, a transformation of S&OP is occurring. Many industry-leading manufacturers — as well as consumer goods distributors and their retail partners — have been working towards elevating their S&OP processes to an enterprise-wide global scale in order to enhance supply chain visibility, reduce costs and achieve more integrated business planning and management. As a result, businesses of all types and sizes are now discovering how this next generation of S&OP can actually become a mission-critical element of an integrated business management strategy.

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Sales & Operational Planning (S&OP)

Sales & Operational Planning

Sales & Operational Planning (in sort S&OP) stands for business process of integrating all the planning entities of an enterprise, an evolved version of it is also termed by industry experts as Integrated Business Planning (IBP) process. IBP process compromises of complete planning cycle in following order, Sales Revenue Planning, Demand Planning, Supply Planning, Profit based Supply/Demand balancing, Management Review. S&OP focuses on balancing of demand & supply with the financial plan supporting it and is a monthly reviewing process. Stakeholders in this process review the data at aggregated level in quantity as well as in amount and it facilitate the in putting the strategic decision plans to execution.

S&OP process involves and/or interacts with following processes:
- Sales Planning
o New Product Planning
o Revenue, Margin & Profitability planning
o Enterprise Goals
- Demand Planning
o Sensing Demand
o Forecasting Demand
o Demand Collaboration(sales, marketing and operations)
o Shaping Demand(events, promotions, causal factors etc)
o Consensus Forecasting
- Supply Planning
o Capacity Planning(supplier, resource)
o Inventory Planning(Safety stocks, postponements)
o Material Planning
- Demand/Supply Balancing
o What if Analysis - simulations
o Collaboration(internal as well as external)
o Constraint based planning
- Review
o Key Performance Indicators(KPI) measurements
o Plan vs Actual
o Margins
o Inventory Turn
o Forecast Accuracy
o Exceptions & Alerts