6 Steps to S&OP Excellence
Suppose companies have disconnected sales and operations planning. In that case, there remains a risk of inaccurate forecasting, redundant stock levels, missed sales opportunities, unnecessary or excess stock levels, and other issues because of a lack of alignment and collaboration. This gap in planning processes can negatively impact a company’s overall performance and thus needs to be resolved.. Here is where the sales and operations planning software comes into use.
What Is Sales & Operations Planning?
Sales and operations planning is a feature of supply chain management, and the main aim is to better match a manufacturer’s supply with demand by having the sales department collaborate with operations to create a single production plan and thus create a unified, consensus-based business plan. It draws input from a company’s significant functional areas that involve sales, marketing, distribution, finance, and disbandment. Cross-functional communication helps to devise plans that all stakeholders can comprehend and are devoted to supporting.
S&OP is a complex process among all the supply chain processes. Small businesses might only require an inventory plan and enhance certain capabilities such as supply and demand planning when the company grows. Organizations begin to include sales and operations planning in their operations when they start to sell a large number of products with different SKU units.
6 Steps of Sales and Operations Planning
The purpose of S&OP is to enhance transparency, align the demand side with the supply side and increase sales and revenue. This strategy works only when you are backed by sales and operations planning software, which provides transparent visibility throughout the process, monitors large datasets, and enhances collaboration across different departments.
- Product Review – In the first step of the S&OP process, planners include product development, R&D, new product introduction, examining the quality of goods in the market, analyzing product pipelines, and arriving at decisions related to product planning. These decisions may involve fixing dates for new production or identifying essential projects, and allocating resources. Other topics which are talked over in this phase might include the effect on the present goods when a new product is launched in the market, which is known as supersession or cannibalization.
- Demand Review – The objective of this step is a consensus demand planning or unrestricted forecast, which incorporates an overview of dependent and independent demand. Factors impacting dependent and independent demand include new product introduction, marketing, product hierarchy, consumer trends, etc. Consensus demand planning depends on an amalgamation of marketing, sales, and product plans. The demand plan is calculated in terms of unit or revenue. Statistical forecasting is infused with marketing strategies and customer input to predict, modify and reach a consensus plan. Historical performance is included in the plan, and the demand plan is compared to the outcomes of the finance review to find any demand gaps or revenue.
- Supply Review – This step aims to formulate a supply plan that aligns with the consensus demand plan. Generally, these two plans work together, and the supply plan needs to balance the customer service and reduce the operational and inventory expenses. A baseline production strategy and rough-cut capacity plan are built in addition to alternate supply strategies considering demand fluctuations and capacity. “What-if ” situations play an essential role in this step. It is necessary to have a technology platform that can operate while using real-time data. These situations are different from the more tactical “what-if” queries to long-term circumstances. Still, both functionality remains similar, which is to minimize risk and comprehend the advantages and disadvantages of a host of alterations. Examples of simple situations include workforce or inventory re-balancing, and complicated circumstances include onboarding a new supplier or workforce training. Generally, as these situations arise, they are automatically linked to the budgetary requirements so that the risk of financial projections can be produced.
- Finance Review – There are certain debates around the position of this process. Some think that it comes after the first three phases of the process and others feel that they should always be in constant process. Either way, the goal is the same: to generate a set of baselines that become modifications to product, demand, and supply review, in addition to the input utilized in pre-S&OP and executive S&OP reviews. In this step, financial data for the past month is combined to offer inputs to examine the current month’s S&OP cycle. Finance commands this step and includes several categories or views, including geography, product, channel, and customer. Real costs are balanced against forecasts and budgets to examine forecast accuracy over a particular time frame. An interlinked approach to S&OP implies that regardless of where this step falls in the process, financial analysis has a significant role to play in producing inputs into the executive S&OP and pre-S&OP steps.
- Pre-S&OP – A set of meetings with authorities at different levels that display the connectedness of plans related to product, demand, supply, and finance. Usually, these meetings revolve around a cloud-based system that contains all the plans in a single place. The reason behind pre-S&OP is to determine gaps and produce plans for handling those problems. The strategies are rechecked in shared dashboards, and the real versus variance is examined by keeping budgets and targets in mind. Factors such as profit, revenue, and inventory are inspected to understand decisions’ financial and operational impacts. Alterations to the product, demand, and supply plans are done in real-time.
- Executive S&OP – The final process of S&OP unites all the data and plans on a cloud-based platform to be utilized in executive S&OP meetings. “What-if” scenarios and risks are rechecked, and decisions are noted so that authorities know when to make appropriate choices. Any meaningful choices that are not solved in the first five steps are addressed in this phase, and the purpose for escalation is analyzed. After that, decision deadlines are set.
Fountain9 offers one of the best sales and operations software that assist food businesses and D2C brands in reducing waste and losses due to stockouts and enhancing profits. It also assists businesses in maintaining an optimally stocked inventory with high availability to meet consumer demand.