Creating Sales & Operations Planning Processes (S&OP):   Key to Effective Supply Chain Optimisation

Sales and Operations Planning, S&OP, supports the notion that making good decisions all of the time is preferable to making outstanding decisions some of the time.  Tom Wallace (MRP II: Making it happen) defines S&OP as follows:

• Sales & Operations Planning (S&OP) is a business process that helps companies keep demand and supply in balance.
• S&OP is cross functional… including the executive in charge of the business unit
• Used properly S&OP enables the company’s managers to view the business holistically and gives them a window into the future. ...

Creating Sales & Operations Planning Processes (S&OP) Key to Effective Supply Chain Optimisation

Sales and Operations Planning, S&OP, supports the notion that making good decisions all of the time is preferable to making outstanding decisions some of the time.  Tom Wallace (MRP II: Making it happen) defines S&OP as follows:

• Sales & Operations Planning (S&OP) is a business process that helps companies keep demand and supply in balance.
• S&OP is cross functional… including the executive in charge of the business unit
• Used properly S&OP enables the company’s managers to view the business holistically and gives them a window into the future.

The processes involved in S&OP lead to one common plan for the business that is achievable as it takes into account demand, available capacity and business constraints:

• Input: customer demands, forecasts, draft Master Schedule, replenishment plan, projected inventory plan & supply constraints
• Output: agreed Master Schedule, replenishment plans, shipping plans

In order for this to happen there needs to be an agreement on priorities and objectives for the whole business.  One plan is developed on-line, collaboratively, including key suppliers and customers, and signed off in a formal S&OP meeting attended by representatives of all internal stakeholders, i.e. Sales, Marketing, Logistics, Manufacturing, Purchasing, Finance, Management.  Traditionally, S&OP has tended to be done outside of the business system, i.e. MRP II, as per the diagram below:

The problems with undertaking S&OP in this fashion are manifold and include there being no integrated data or process and it being very labour intensive.  Add to the mix that there is very limited involvement of customers and suppliers, a lack of buy-in to the process from management and that it does not adequately support agility and you begin to understand the limitations of this approach to S&OP.

Today’s technologies make effective collaboration tools a reality and thereby allow S&OP to be a continuous process as rich communication can take place via the internet.  Corollaries of the effectiveness of the web as a communication medium are that fewer physical meetings are required and customers and suppliers can be easily involved in the S&OP process thereby improving the quality of the process’ output.  The diagram below shows the roles of the respective systems and how S&OP can be undertaken in a modern organisation.

Considering this S&OP process from a job role and frequency perspective we can represent the process in a different way as shown below.  This diagram will be referred to later as the ‘S&OP Process Map’.

Conclusions to Creating Sales & Operations Planning Processes (S&OP):