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Sales and Operations Planning: Business S&OP Implementations

Updated on September 18, 2012

Sales and operations planning (S&OP) is the decision-making process in sales, marketing, and demand/supply planning areas that aims to align each of the business functional areas with the organization’s overall financial strategy. As such, it’s an integrated process that involves teams from many different departments and functional areas.

Before S&OP can occur, several other things must happen. First, a demand planning meeting – teams involved with marketing, sales, and demand planning must collaborate to gather all statistical data that relate to demand projections and marketing campaigns. This is used to create what is known as the unconstrained sales plan.

Once completed, the unconstrained sales plan is utilized by the supply and resource planning team, which determines how to best match up the demand plan with a manufacturing/production plan. The decisions made by this team are in the context of available infrastructure (how much can we manufacture per month, how much can we store). This produces an operations and resource plan.

The final stage before the actual S&OP meeting is the finance integration process. This is the meeting where profit/revenue targets and strategic business goals are integrated with the reports generated by the previous two meetings. Financial managers can then make recommendations with these business goals in mind.

In the S&OP meeting, which is held once a month in most companies, each team discusses their views on the recommendations made by the financial team. Focus is given specifically to risky areas that need further analysis by one or more of the teams. This meeting finalizes the operations plan and enables the marketing and sales departments to set appropriate prices and engage in ad campaigns.

KPIs: Further Reading

Execution of S&OP Plans: Important Considerations

There are several important principles to keep in mind during S&OP implementations.

First, alignment of objectives. In any business, each department will generally have its own goals – production wants a certain output per month, quality wants a certain PPM defect rate, finance wants to meet a certain profit target, etc. However, as S&OP is an interdepartmental process, it’s important to align these plans so the overall S&OP implementation can have clearly defined goals that integrate targets for all departments.

Second, consistency between numbers. As discussed above, different departments have different goals. As such, each group may use a different set of KPIs to measure their progress. In the S&OP process, different KPIs might be more helpful. In any case, it is important to agree upon what numbers and data metrics will be used beforehand.

Third, assignment of clear roles. Especially for large multinational corporations, S&OP implementations might require employees to collaborate across states, countries, and even continents. With so many people in so many different locations involved in the process, it must be well-defined who is responsible for doing what. If this doesn’t happen, the process will not run smoothly.

S&OP: Sticky Areas

The S&OP process is important, but it requires four key components: people, process, strategy, and performance. A weakness in any one of these categories can spell disaster for the project as a whole.

The people involved in S&OP include executives as well as cross-functional teams from all of the business functional areas discussed previously. Say one team tries to prioritize their group or departmental goals above the committee goals. (This is an example of silo thinking.) In this scenario, the S&OP implementation will not go as smoothly as planned, because the people involved are not cooperating. It’s important to stress the strategic benefits of prioritizing S&OP goals.

The process used is also important. Regular exchange of data and ideas is important for a successful S&OP process. Performance must be constantly measured and analyzed in the interests of improvement.

Finally, strategy is very important. Collaboration with other organizations involved in the supply chain is important, especially working with customers to best determine their needs. Having a S&OP process in place is useless if it doesn’t fulfill customers’ requirements.

One more concept worth noting is timeframes. S&OP is a forward-looking process planning for the medium timeframe. This is important to keep in mind during implementations, because getting caught up in micromanaging daily affairs can often preclude managers from effectively focusing on the longer term problems.

This article is written by Skyler Greene, all rights reserved. It's hosted on HubPages, an online community where everyday experts like you and me can publish high-quality articles like this one and earn a share of the ad revenue they generate. Sign up for HubPages.

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