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sales and operations planning
Sales and operations planning (S&OP) is an integrated business management process developed in the 1980s by Richard (Dick) Ling previously a consultant at Oliver Wight Company through which the executive/leadership team continually achieves focus, alignment and synchronization among all functions of the organization. The S&OP planning includes an updated forecast that leads to a sales plan, production plan, inventory plan, customer lead time (backlog) plan, new product development plan, strategic initiative plan and resulting financial plan. Plan frequency and planning horizon depend on the specifics of the industry. Short product life cycles and high demand volatility require a tighter S&OP planning than steadily consumed products. Done well, the S&OP process also enables effective supply chain management.
A properly implemented S&OP process routinely reviews customer demand and supply resources and “re-plans” quantitatively across an agreed rolling horizon. The re-planning process focuses on changes from the previously agreed sales and operations plan, while it helps the management team to understand how the company achieved its current level of performance, its primary focus is on future actions and anticipated results. Companchj〔Palmatier,George E., "The Need to Lead", text available (here )〕 Newest developments in Sales and Operations Planning on how the planning process becomes more customer centric was written by Richard (Dick) Ling and Andy Coldrick in chapter 20 in the 3rd edition of Orlicky's MRP 〔Ptak, Carol & Smith, Chad (2011). ''Orlicky's MRP 3rd edition'', McGraw Hill, New York ISBN 978-0-07-175563-4.〕
== Definitions ==
APICS defines S&OP as the "function of setting the overall level of manufacturing output (production plan) and other activities to best satisfy the current planned levels of sales (sales plan and/or forecasts), while meeting general business objectives of profitability, productivity, competitive customer lead times, etc., as expressed in the overall business plan. One of its primary purposes is to establish production rates that will achieve management’s objective of maintaining, raising, or lowering inventories or backlogs, while usually attempting to keep the workforce relatively stable. It must extend through a planning horizon sufficient to plan the labor, equipment, facilities, material, and finances required to accomplish the production plan. As this plan affects many company functions, it is normally prepared with information from marketing, manufacturing, engineering, finance, materials, etc."〔Dougherty, J.R., "Getting Started With Sales & Operations Planning", text available (here )〕
Sales and operations planning has evolved into a major business process adopted to manage the balance and trade-off between the conflicting preferences of the supply and demand side of the supply chain and offers many value creation opportunities. It is one of the most critical business processes used to achieve best in class performance to consistently outperform competitors. It is increasingly being viewed as essential to synchronise the entire supply chain in order to improve its efficiency.〔Kumar, Rakesh and Srivastava, Samir K, "A Framework for Improving ‘Sales & Operations Planning"’, ''Metamorphosis'', 13(1), 2014, pp.16-25.〕 It has also been described as "a set of decision-making processes to balance demand and supply, to integrate financial planning and operational planning, and to link high-level strategic plans with day-to-day operations."〔Wallace, Tom, author of textbooks on sales and operations planning, see for example (S&OP 101 )〕
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