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  • Writer's pictureCEO-ME

Sales and Operations Planning Best Practices: A Complete Guide

sales and operation planning

In sales and operations planning (S&OP), sales and operations collaborate to create one production plan to match supply with demand. Ultimately, daily operations must align with corporate strategy.

The sales and operations planning process is typically intertwined with marketing, procurement, manufacturing, transportation, and finance departments which are closely involved in demand and supply.

The efficiency of a business production is dictated by S&OP, which has a company-wide impact. Let's explore sales and operations planning best practices and find out how you can achieve success in sales.

Sales and Operations Planning Definition

Creating a unified, comprehensive business plan is the goal of sales and operations planning. Several key departments of an organisation contribute to developing a sales and operations plan, including sales, marketing, manufacturing, distribution, and finance.

Collaboration across functional lines produces plans that stakeholders understand and support. S&OP is typically considered a more advanced practice in the context of supply chain planning.

Startups or smaller organisations may only need inventory planning. We recommend incorporating supply and demand planning over time. Once an organisation sells more differentiated products, they commonly seek S&OP solutions.

What Makes Sales and Operations Planning So Effective?

Statistics-based forecasting can provide excellent results in planning. Despite that, the results tend to be fairly limited.

Statistics forecasts are based on algorithms and item histories. A statistical forecast, however, often excludes other data, including revenue projections and marketing events. The business does not collaborate effectively with key stakeholders as a result.

Contrary to the traditional forecasting approach, sales and operations planning combines input from sales, marketing, finance, and operations and adjusts the forecast accordingly. Other market-related data is also incorporated into advanced S&OP practices like point-of-sale (POS) data. Organisations can use supply chain planning software solutions for S&OP.

Enjoy Enhanced Collaboration

Collaboration is what adds value and results to S&OP. The same data sets are used by all parties, allowing them to align successfully. Checks and balances in sales and operations planning eliminate excuses and encourage accountability. Often, such collaboration produces impressive results.

On average, high-performing S&OP-driven companies experience the following benefits:

  • 15% less inventory

  • 17% stronger perfect order fulfilment

  • 35% shorter cash-to-cash cycle times

  • 1/10th tenth of the stock-outs

Sales and Operations Planning Benefits

By tying up less cash in inventory, sales and operation planning can boost working capital by improving forecast accuracy and cutting inventory costs. New products and marketing initiatives can also be improved by utilising S&OP.

As a result of sales and operation planning, on-time delivery rates can improve, increasing customer satisfaction and sales. S&OP advocates also tout better visibility into operations, marketing, and finance data.

As a result of automating the planning process through sales and operation software, labour costs are reduced, and productivity is increased. Employees are relieved of the cumbersome, often manual process of preparing forecasts.

Let's Take a Closer Look at S&OP Advantages

  • Inventory reduction: Improve cash flow by reducing inventory carrying costs.

  • Speed up the launch of new products: Staying one step ahead of your competitors will increase revenue.

  • Capacity enhancement and cost reduction: As a result of reducing operating costs, the organisation's productivity will increase.

  • Improved product quality: Lower costs of goods sold by enhancing product quality.

  • Streamline lead times: Maximise revenue by reducing delivery costs and inventory while reducing expediting costs.

  • Improved customer service: Increased sales and customer satisfaction resulting from improved customer service.

Sales and Operations Planning in 6 Steps

Product Review: This first step of the S&OP process involves analysing the market health of products, examining product pipelines, and making decisions about future products. Setting a date to start new production or sunset a project may determine a project's priorities and resource allocation. There may also be a discussion on cannibalisation and superseding existing products in this phase.

Demand Review: Here, an unconstrained forecast is created, which combines independent and dependent demand factors. The marketing, the introduction of new products, consumer trends, the hierarchy of products, and the demand for interplant parts are all factors that can influence independent and dependent demand. Sales, marketing, and product plans are combined to create the consensus demand plan.

It is possible to express a demand plan in terms of units or revenue. A consensus plan is derived by combining statistical forecasting with customer input and marketing plans. Ultimately, the demand plan will be compared to the results of the finance review to determine if there are any revenue gaps or demand gaps.

Supply Review: This phase aims to align supply and demand plans. Ideally, these two plans work in unison. Customer service and inventory minimisation are important components of a good supply plan. Various supply plans, including capacity and demand variation-adjusted baselines, are developed.

Technology platforms that allow you to run real-time scenarios are imperative to this phase of the process. In both cases, the purpose is the same: to reduce risk and understand the ups and downs of a wide range of adjustments.

Inventory rebalancing and workforce rebalancing are examples of straightforward scenarios, while onboarding a new supplier, adding capacity, or training workers is an example of a more complex scenario. It would be ideal if these scenarios were automatically linked to budgetary requirements so that financial risk projections could be calculated as they develop.

Finance Review: This stage is subject to some debate. In some circles, it falls after the first three phases get completed, while in others, it should be ongoing. Regardless, its mission remains the same: develop baselines for product, demand, and supply reviews as well as pre-and executive-level sales and operation planning.

A monthly financial performance review is conducted to analyse the current month's S&OP cycle. Finance owns this process, and it can include a variety of categories or views, such as product, geography, customer, or channel. Budgets and forecasts are compared to actual costs over time to gauge forecasts' accuracy. Sales and operations planning is a connected process, and financial analysis plays a key role in outputting inputs to pre-and executive-level planning, regardless of where it occurs.

Pre-S&OP: This is a series of meetings demonstrating how product, demand, supply, and finance plans relate to one another. All meeting plans should be stored in one place on a cloud-based platform. By identifying key gaps and disconnects, pre-S&OP creates strategies to deal with them. Based on targets and budgets, actuals are compared with variances in shared dashboards.

We analyse financial and operational outcomes by rolling up to the corporate level and down to the product-line level. The plan is adjusted in real-time as demand, supply, and product change.

Executive S&OP: Almost there. Final plans and data are gathered in a unified, cloud-based platform for executive planning meetings. A review of possible scenarios and their associated risks is conducted to ensure leadership is aware of decision points when they have to make them. Phase six addresses any key decisions left unresolved from the previous five phases, explains the reasons for escalation, and assigns decision deadlines.

Sales and Operations Planning Best Practices

sales and operation planning best practices

Participation and Support of Executives in Sales and Operation Planning

In every executive S&OP meeting, the executive leader must actively participate and provide leadership. Generally, an executive leader is the chief executive officer, president, managing director, general manager, or person responsible for the organisation's P&L.

By aligning planning across functions, sales and operation planning improves performance and meets company objectives. Functional leaders may sometimes disagree on the best approach, thus requiring a compromise between functional areas. Executive leaders use S&OP meetings to make routine decisions and decide what to do.

A lack of commitment from the executive leader will lead to friction when functional leaders find other solutions. This undermines sales and operation planning, stalls performance improvement, and decreases participation.

Fully cross-functional S&OP scope

Sales and operation planning facilitates cross-functional alignment and collaboration. In order to achieve the company's goals, all functional leaders must participate (such as the VP of product, sales, marketing, supply operations, and finance).

Rowing crews are less competitive when there is an empty seat on the crew. It is impossible to deliver customer value and achieve financial results without any functional areas in the sales and operation planning. Insufficient coordination on product introductions, unexpected sales, unexpected promotions, material constraints, or capacity constraints are some consequences of being in an empty S&OP seat. As a result, the company's performance is negatively affected due to mismatches in product volume, mix, location, or timing.

Your sales and operations planning process likely have an opportunity to improve performance if it reveals an empty seat on a team that includes the product, sales, marketing, supply operations, and finance leaders.

Utilizing Constructive Issue Resolution

Conflict is inherent in sales and operation planning. A corporate strategy can only be achieved through the development of tactical plans. The best approach is certain to differ between functional heads. It is crucial for the sales and operations planning teams to be candid and constructive when discussing issues and challenges to achieve corporate goals.

Is Technology Holding You Back?

When choosing a sales and operation planning solution, functional and technical criteria are typically evaluated first to determine how well the solution fits the company's needs. A solution's ability to work and how well it fits with the unique business operations of a company is more challenging to evaluate.

What kind of information sharing and decision support does the solution provide beyond abstract functional requirements? Does the solution enable a company's unique business processes? Do business operations need to change to support the solution?

Rather than dictating business operations, an sales and operation planning solution must enable them. Forced-fit solutions generally result in low adoption and undermine the success of S&OP programs.

How Can Sales and Operations Planning be Integrated Successfully?

Despite fine-tuning each phase, it's important to move forward without sacrificing quality. Let's explore four keys to successfully integrating sales and operations planning.

Don't put garbage in (or you'll get garbage out)

In the case of corrupt or outdated data, you will have trouble making wise decisions. If you don't have access to accurate, real-time data, making good, informed decisions is almost impossible. Several business areas are affected by sales and operation planning decisions, so they can't be based on sketchy data.

To start, follow these three steps:

  • Find out what data is available

  • Discover where it lives

  • Determine who owns it

After you've gone through these steps, create dashboards to present this data and let them indicate what data may be missing. Knowing the cornerstone of your decision is trustworthy gives you confidence in your decisions.

Be wise with your S&OP metrics

Sometimes organisations have too many metrics, or their definitions are inconsistent. The meaning of data can be debated endlessly, or meetings can be lengthy and boring. The first step to breaking free of this sterile environment is to define your metrics. In addition to executive dashboard metrics, some metrics should complement an end-to-end view of the supply chain (detailed supply and demand forecasts).

In contrast, others describe functions (such as sourcing, manufacturing, or logistics). After that, work towards driving action and improvement by aligning levels.

Find a strong advocate

Future supply chain leaders don't operate in isolation. A cross-functional collaborator is crucial to next-generation sales and operation planning and essential to cross-functional collaboration. As an internal advocate working with all the departments in the S&OP process, find someone with patience and a wealth of knowledge to play the role of "stakeholder herder" with patience.

The bottom line

With CEO-ME, sales and operations planning (S&OP) is unified across all relevant business units into one cloud-based, connected platform. When plans and data from sales performance management, financial planning and analysis, product, marketing planning, and supply chain work in sync, executives can make better-informed decisions that maximise profitability.

How to Choose The Best Sales and Operations Planning Software?

Compatibility. Ensure your business operations are compatible with the solution. Sometimes, a pilot may be required to confirm fit, depending on the solution type.

Ease of use. Changes in business conditions and opportunities can make the solution outdated after longer implementation times. Reduce project planning and solution selection time to value. In 8–12 weeks, expect to see demonstrable value.

Adaptability. There is no escaping change. Business needs to adapt technology to change, or it will become a friction point and slow things down. Minor modifications should not take more than an hour to implement. If it takes more than a day, avoid it.

Business-user administration. Business users can administer modern solutions without IT assistance. Since most IT departments are overburdened, this is a welcome development. Unless technical resources are available for application administration, avoid a solution.

No change orders. System integrators or technology providers no longer need to receive change orders from business users. It is time-consuming and expensive to obtain a change order, and you cannot be as flexible as you would like because there is a formal approval and justification process involved.

The Value of Integrated S&OP

Many companies still use spreadsheets to prepare a sales forecast, regardless of whether they use specialized analytics or forecasting tools, or if they are using in-demand planning software. In material requirements planning (MRP) software or ERP systems, production planning is usually handled in a separate module.

Because much of this specialized software exists in silos and doesn't necessarily link data, plans, and departments, CEO-ME offers sales and operations planning software for integrating all the steps.

Unlock the true potential of your sales workflow by adapting our business development software! You can level up your sales process with our software's sales and operations planning features. Try it out for free!


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