This blog post will review why the sales & operations planning process is a critical part of executing supply chain management, aligning multiple functions on how to operate.
What is S&OP
The Sales & Operations Planning (S&OP) process is a culmination of aligning the multiple plans created across the supply chain (e.g., Supply, Demand, Finance, Sales, marketing, Operations et al.), with the end goal being a consensus plan which all functions will then operationalize. This process is usually performed closer to when goods or services are being released in the Market and requires collaboration across all parties for a successful output. This process will take the strategy built-in across the supply chain into tactical plans to execute against.
Reaching Consensus
The process of reaching consensus in the S&OP process involves a coordinated effort across all functions that participate. Each plan represents a functional point of view, based on specific priorities at certain points in time. The ability to communicate these assumptions when presenting plans will help decide the best path forward—scenario planning and incorporating “what ifs” will help determine the best output. The S&OP process is only as good as the plans coming from Supply, Demand, Finance, Sales, Marketing, etc. - if needed, further refinement may need to be made within an internal function.
Maturity & Evolution
S&OP processes have evolved for some more mature companies. In the Integrated Business Planning (IBP) process, a more significant effort is made to plan more collaboratively in much earlier time frames. The thought process of earlier partnership and communication is to minimize forecast variances closer to the Market, leading to more optimal revenue and margin. For the IBP process to be successful, planning and forecasting capabilities should be more mature.
Another mature process involves taking the tactical consensus plans coming out of the S&OP process and going into greater detail in the Sales & Operations Execution (S&OE) process. In this process, the focus is placed on creating execution plans at lower grains in time (e.g., Weekly or Daily Plans) and product hierarchies (SKU level vs. Product Family level). This detailed level enables companies to have a sharper, cross-functionally aligned point of view on executing against supply chain priorities. The separation of tactical vs. execution allows more clarity and focus across the supply chain and sales & Operations Planning.
The above processes can help to transform an organization’s supply chain. However, there are specific challenges and barriers to entry to enable and execute IBP and S&OE. First, processes and decision rights must be defined across functional participants. The absence of this clarity will not allow the process to be agile and detailed as intended. Second, advanced and flexible tools must create plans with greater detail, incorporating more information across multiple scenarios with speed and precision. These foundational elements will help with the expansion of the S&OP process.
Resilience factors and the S&OP Process
One of the critical challenges of any planning process (as mentioned in previous blog posts on this site focused on Demand Planning and Sales Planning) revolves around inputs and assumptions factored into each plan. While identifying relevant stressors (e.g., social, political, or Market stressors) within each individual function is an essential step in building resilience, the complexity increases when aligning across multiple functions. If there is a shared understanding across supply planning, demand planning, finance, operations, and other tasks on which stressors are essential, and how they impact each plan, the S&OP process can become more robust and informed. Any shared impacts from multiple stressors can then be applied across any scenarios in driving towards the optimal consensus plan more systematically and efficiently - building a path to resilience.
Where to Start?
Coordination across all functions participating within S&OP is needed to align not only on driving business results but also on setting up a successful resilience framework. Let RCSG help you with the prioritization process and identify stressors by leveraging our supply chain resilience framework and expertise and applying across functions. The result will be a more robust S&OP process and a more resilient supply chain.