Execute Your Sales & Operations Plan
Do sales forecast “misses” cause Operations and Supply Chain to make last minute changes to plans and schedules? Does your decision-making process lack alignment between key functional areas? Do these ripple effects negatively impact sales, supply chain and financial performance? If you struggle to turn your sales forecast into a reality because operations, supply chain, sales and finance are not aligned, then you need to consider the S&OP process. Sales & Operations Planning is coordinated demand planning, supply planning and financial planning to support decision-making.
Sales and Operations Planning 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 are service firms with very specialized human resources.
To help you get started developing and implementing your S&OP process, Supply Velocity’s sales and operations planning consultants will conduct an Assessment. We will evaluate your business based on common examples or symptoms of a struggling planning process. Often during the Assessment we will discover necessary pre-S&OP process development work – for example inventory management might require some improvement to support supply planning or your production plan. The deliverable of an S&OP Process Assessment is a detailed implementation plan and pre-S&OP work required to ensure success.
Implementing Sales and 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
- Limit to 9 product families for the entire company if possible
- Determine unit-of-measure (UOM): each, case, pounds, gallons, pallets, truckloads
- Determine how to measure your capacity (for the operations plan): labor hours, machine hours, production space, warehouse pallet positions, dock doors
- Decide on your time fences and how far in the future you will plan (forecast) internal operations and your supply chain: production lead-time, average supplier lead-time, longest critical supplier lead-time
- Create your S&OP meeting spreadsheet tracking forecast, actuals, and available to promise
Sales and Operations Planning – Timing
The monthly S&OP Process includes four distinct S&OP meetings as pictured above.
- Demand Planning Meeting: this meeting is typically led by the sales team using sales forecasts, marketing plans and / or sales planning to determine future demand. We recommend combining an algorithmic forecast with sales representative input on specific customer demand information to improve forecast accuracy. The output from the demand planning is an unconstrained demand forecast.
- Supply Planning Meeting: this meeting is led by the operations team and uses the unconstrained demand forecast as the key input. Available inventory, resource and production capacity will be integrated with the unconstrained demand forecast. The output from this meeting will be constrained sales forecasts, product family dashboards, and opportunities to fulfill potential unmet demand. These opportunities will be reviewed and discussed in the following two meetings.
- Balancing Meeting: this meeting brings together the demand planning and supply planning teams to resolve any open issues and identify opportunities for escalation to the Executive S&OP Meeting. The teams will leave this meeting prepared to present to the executive team. The key output is the data and analysis to support decision-making by the executive team.
- Executive S&OP Meeting: this is the final S&OP meeting each month. The teams will present the demand and supply plans as well as any issues or opportunities that arose during the monthly process. The purpose of this meeting is not review, it is decision-making. At the end of this meeting there will be a clear path forward on how the company will execute the plan in the short and medium term. Additional strategic plans focusing on the long-term gaps may also be decided.
Buy-in, Buy-in, Buy-in
A successful sales & operations planning process requires collaboration across all business units and functions. If your executive team does not see this process as critical to executing your sales, operations, and financial plan, it will die. They must 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 S&OP process is the integration of supply chain management. If you are not using sales and operations planning, then the center of your supply chain (your company) will be out-of-balance. If your company is not aligned, how can your supply chain (suppliers and your customers) be aligned? A functioning S&OP process creates the foundation for supply chain management.