Do Sales forecast “misses” cause Operations to make last minute changes to their planned schedule? Does the ripple effect negatively impact Supply Chain and financial planning? If you are having problems turning your sales plan into a reality because operations, sales and finance are not aligned, then you need to consider the S&OP process. S&OP is simply a sales
S&OP is simply a sales (demand) plan, an operations (supply) plan and a financial (investment) plan…
(demand) plan, an operations (supply) plan and a financial (investment) plan that are synchronized and presented together, monthly or quarterly, to executives as an aligned plan.
S&OP has often been associated with manufacturing; however, this considerably limits its use and usefulness. Any company with resource constraints can use the S&OP process. Some of the most effective users of S&OP are consulting firms with very specialized, and expensive, human resources.
Implementing Sales & Operations Planning:
- Start with a pilot using only one product family
- Define your product families based on: product characteristics, production process, market-segment, distribution channel
- No more than 9 product families for the entire company
- Determine how to measure your capacity (for the operations plan)
- Decide on your time fences and how far in the future you will plan (forecast)
- Production lead-time
- Average (or 80/20) supplier lead-time
- Longest critical supplier lead-time
- Create your S&OP spreadsheet. See the end of this Service Summary for an example.
- Week 1: Close the books on previous month; Gather data on prior month; Develop the new statistical forecast
- Week 2: Update (override) statistical forecast with sales department generated forecast
- Note: it is important that assumptions are documented
- Week 2: Supply (operations) and Demand (sales) meeting to find imbalances
- Week 3: Resolve imbalances
- Week 4: Executive S&OP meeting
Buy-in, Buy-in, Buy-in
If your top management doesn’t see this process as critical to executing your sales, operations and financial plan, it will die. They have to participate in every meeting. If monthly is too frequent use quarterly S&OP meetings.
S&OP and Supply Chain Management
Another important consideration of the process is S&OP Supply Chain. If you are implementing supply chain management but you are not using sales and operations planning then the center of your supply chain (your company) is out-of-balance. If your company is not aligned, how can your supply chain be aligned?
Product Family S&OP Spreadsheet