Sales & Operations Planning, or S&OP, not to be confused with Sales Order Processing or Standard Operating Procedures, is an executive management technique used to streamline demand, supply and financial operations. Despite the ability to transform a company’s fortune, many have yet to establish an effective S&OP process.
Outside the board room it is common for directors and managers to operate in silos. When targets are not met; the Sales Director will exhort his team to increase sales; the Production Director will review manpower and planned maintenance, reduce raw materials and packaging; the Operations Director will seek out cost-saving initiatives – reduce manpower and stock; the HR Director might slow down recruitment.
This leads to an un-coordinated approach: If sales do go up the operations team might find themselves unprepared and the HR team has to call in agency staff. Costs rise, exceeding sales growth, which could have been avoided with a formal S&OP strategy.
An S&OP process is simple in concept
Sales produce a forecast based on fact – one that is understood, bought into by the business as a whole, and signed off by the board. Focusing on short-term projections, typically three months, management can develop a tactical plan for all business activity.
The information from the Sales planning element flows through to Operations Planning. Production, Operations and HR will all plan based on this forecast. A much more detailed and confident view of what could be happening in three months will be formed. Whether it highlights good or bad news informed business decisions can be made. Proactive tactical planning can begin – rather than reactive soul-searching and panic.
The S&OP executive meeting repeats every month without fail, following a defined process with key milestones. The sponsor will be the Managing or Financial Director, whereas responsibility for running the process usually falls to the Supply Chain team as that is traditionally where the forecasting and management inventory skills lie.
Tangible results are realised around month 6 and grow thereafter. Intangible benefits tend to arise almost immediately with teams feeling part of the whole and having more confidence. The interaction between teams, and knocking down of the silos, leads to changes that impact positively beyond the direct process.
S&OP is a major project to set up, requiring the right tools and processes, and necessitates cultural change. For this reason most in-house deployments fail. Davies & Robson work with clients to develop a bespoke S&OP ensuring its adoption, and ongoing use, is guaranteed.