Sales & Operations Planning (S&OP) is a set of decision-making processes to balance demand and supply, to integrate financial planning and operational planning, and to link high level strategicplans with day-to-day operations. Let's walk through this subject question by question.
Why Do Companies Use S&OP?
Many companies have difficulty in establishing valid game plans for sales,production, procurement, and inventory levels -- and then tying them to day-to-day scheduling and execution. As a result, performance suffers: customer service is poor, production and procurement areinefficient, inventories are too high or too low, or all of the above.
Sales & Operations Planning has emerged as an essential management tool in this age of rapid change, increasingly demandingcustomers, and supply chains that extend half a world away. It's rightfully been called "top management's handle on the business."
What is Executive S&OP?
Executive S&OP is top management's part ofthe overall set of Sales & Operations Planning processes. It's a tool that enables the top management team to establish in advance the desired levels of customer service, inventory investment, andcustomer order backlogs — and then manage the business proactively to achieve those targets.
An important point: Executive S&OP, which focuses on aggregate volumes, is essential to gain the maximumbenefits from the other parts of Sales & Operations Planning, the ones that address the details (Master Scheduling, Plant and Supplier Scheduling, Distribution, and other types of detailed planning andcoordination).
The results from the monthly Executive S&OP process drive downward to impact directly the day-to-day activities in Sales, Purchasing, Production, and Distribution - and also driveupward, so that the company's Financial Plans can reflect current realities and future operational plans.
What are the Benefits of Using S&OP?
"Hard" benefits -- ones that can be readily measured...