View source for Social:Sales and operations planning

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{{Short description|Integrated business management process}}
'''Sales and operations planning''' ('''S&OP''') is an integrated business [[Social:Management process|management process]] through which the executive/leadership team continually achieves focus, alignment, and synchronization among all organization functions. The S&OP process includes an updated forecast that leads to a sales plan, production plan, inventory plan, customer lead time (backlog) plan, new product development plan, [[Social:Strategic initiative|strategic initiative]] plan, and resulting [[Finance:Financial plan|financial plan]]. Plan frequency and planning horizon depend on the specifics of the context.<ref>{{Cite journal |last1=Kristensen |first1=Jesper |last2=Jonsson |first2=Patrik |date=2018-02-22 |title=Context-based sales and operations planning (S&OP) research: A literature review and future agenda |url=https://www.emerald.com/insight/content/doi/10.1108/IJPDLM-11-2017-0352/full/html |journal=International Journal of Physical Distribution & Logistics Management |language=en |volume=48 |issue=1 |pages=19–46 |doi=10.1108/IJPDLM-11-2017-0352 |issn=0960-0035}}</ref> Short product life cycles and high [[Finance:Demand|demand]] volatility require a tighter S&OP than steadily consumed products. Done well, the S&OP process also enables effective [[Social:Supply chain management|supply chain management]].
[[File:A company's supply chain (en).png|thumb|Integration between the departments, with suppliers and customers]]
The Sales and Operations planning process has a twofold scope. The first scope is the horizontal alignment to balance the supply and [[Finance:Demand|demand]] through integration between the company departments and with suppliers and customers. The second aim is the vertical alignment amid [[Social:Strategic planning|strategic plan]] and the operational plan of a [[Company:Company|company]].<ref name=":0">{{cite journal |last1=Tavares Thomé |first1=Antônio Márcio |last2=Scavarda |first2=Luiz Felipe |last3=Fernandez |first3=Nicole Suclla |last4=Scavarda |first4=Annibal José |date=July 2012 |title=Sales and operations planning: A research synthesis |journal=International Journal of Production Economics |volume=138 |issue=1 |pages=1–13 |doi=10.1016/j.ijpe.2011.11.027}}</ref>

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 focus is on future actions and anticipated results.

== Definitions ==
S&OP was developed with the concept of aggregated production planning (APP) in the first part of 1950, then switched to manufacturing resource planning ([[Manufacturing resource planning|MRP 2]]) around 1985, till the current definition of business process for the alignment of supply and demand.<ref name=":3">{{cite journal |last1=Márcio Tavares Thomé |first1=Antônio |last2=Felipe Scavarda |first2=Luiz |last3=Suclla Fernandez |first3=Nicole |last4=José Scavarda |first4=Annibal |title=Sales and operations planning and the firm performance |journal=International Journal of Productivity and Performance Management |date=1 January 2012 |volume=61 |issue=4 |pages=359–381 |doi=10.1108/17410401211212643}}</ref> The term ''S&OP'' and its modern meaning were conceived of in the 1980s and are generally attributed to Richard Ling, then a consultant with the [[Social:Management consulting|management consulting]] firm Oliver Wight.<ref>{{Cite web |title=No pain, no gain |url=https://www.manufacturingmanagement.co.uk/content/features/no-pain-no-gain/ |access-date=2022-08-01 |website=Manufacturing Management |date=16 July 2007 |language=en}}</ref> 

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 [[Finance:Sales|sales]] (sales plan and/or forecasts), while meeting general business objectives of profitability, [[Finance:Productivity|productivity]], competitive customer lead times, etc., as expressed in the overall [[Social:Business plan|business plan]]." [[Organization:Institute for Supply Management|Institute for Supply Management]] defines it as "working cross-functionally with internal business units to forecast anticipated demand, inventory, supply and customer lead times based on the sales forecast, actual demand and capacity forecast." One of its primary purposes is to establish production rates that will achieve management’s objective of maintaining, raising, or lowering [[Social:Inventory|inventories]] or backlogs, while usually attempting to keep the workforce relatively stable. It must extend through a [[Social:Planning horizon|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 [[Finance:Marketing|marketing]], manufacturing, [[Engineering:Engineering|engineering]], [[Finance:Finance|finance]], [[Chemistry:Raw material|material]]s, etc."<ref>Dougherty, J.R., "Getting Started With Sales & Operations Planning", text available [http://www.partnersforexcellence.com/artoth01.htm here] {{webarchive|url=https://web.archive.org/web/20071203185622/http://www.partnersforexcellence.com/artoth01.htm |date=2007-12-03 }}</ref>

It has also been described as "a set of [[Decision-making|decision-making]] processes to balance demand and supply, to integrate [[Finance:Financial plan|financial plan]]ning and operational planning, and to link high-level strategic plans with day-to-day operations."<ref>Wallace, Tom, author of textbooks on sales and operations planning, see for example [http://www.tfwallace.com/pages/content/sop_101.html S&OP 101] {{webarchive|url=https://web.archive.org/web/20071013182245/http://tfwallace.com/pages/content/sop_101.html |date=2007-10-13 }}</ref> 

== Planning process ==
S&OP is the result of  planning activities and it is composed of 5 main steps: data gathering, demand planning, supply planning, pre-meeting and executive meeting<ref name=":1" /> with the addition of a preliminary step at the beginning (event plans),<ref>{{Cite journal |last1=Dreyer |first1=Heidi Carin |last2=Kiil |first2=Kasper |last3=Dukovska-Popovska |first3=Iskra |last4=Kaipia |first4=Riikka |date=2018-02-28 |title=Proposals for enhancing tactical planning in grocery retailing with S&OP |url=https://www.emerald.com/insight/content/doi/10.1108/IJPDLM-01-2017-0018/full/html |journal=International Journal of Physical Distribution & Logistics Management |language=en |volume=48 |issue=2 |pages=114–138 |doi=10.1108/IJPDLM-01-2017-0018 |issn=0960-0035}}</ref> two additional steps at the end of the process in case of a [[Finance:Multinational corporation|multinational company]] (global roll-up and global executive meeting)<ref>{{Cite journal |last1=Seeling |first1=Marcelo Xavier |last2=Kreuter |first2=Tobias |last3=Scavarda |first3=Luiz Felipe |last4=Thomé |first4=Antônio Márcio Tavares |last5=Hellingrath |first5=Bernd |date=2021-09-21 |editor-last=Margherita |editor-first=Alessandro |title=Global sales and operations planning: A multinational manufacturing company perspective |journal=PLOS ONE |language=en |volume=16 |issue=9 |pages=e0257572 |doi=10.1371/journal.pone.0257572 |issn=1932-6203 |pmc=8454961 |pmid=34547059|bibcode=2021PLoSO..1657572S |doi-access=free }}</ref> and a critical revision step as conclusive step of the S&OP cycle.<ref>{{Cite journal |last1=Rota |first1=I. S. |last2=De Souza |first2=F. B. |date=2021-04-30 |title=A proposal for a theory of constraints-based framework in sales and operations planning |url=https://jart.icat.unam.mx/index.php/jart/article/view/1580 |journal=Journal of Applied Research and Technology |volume=19 |issue=2 |pages=117–139 |doi=10.22201/icat.24486736e.2021.19.2.1580 |s2cid=236572210 |issn=2448-6736|doi-access=free }}</ref><gallery>
File:Monthly S&OP Process.jpg|A cycle of S&OP Process
</gallery>

It is a tactical [[Process|process]] with a [[Social:Planning horizon|planning horizon]] which covers up to 18 months, at product family level (or sku) and it is performed generally every month (or driven by events in case it is used as a tool to respond quickly to the uncertainty of the context).<ref name=":0" /><ref name=":2" />

It is important to note, that while S&OP is typically viewed as a balancing of supply and demand of "goods".  Patrick Bower wrote a seminal article on the use of S&OP in the service industry.<ref>{{cite journal |id={{ProQuest|1702626994}} |last1=Bower |first1=Patrick |title=S&OP in the Service Industry |journal=The Journal of Business Forecasting |volume=34 |issue=2 |date=Summer 2015 |pages=4–7, 9–16, 18 }}</ref>

== Inputs to S&OP ==
The inputs are related to the plans from the different departments involved in S&OP, including constraints and goals. The inputs could be: demand plans, sales/demand forecasts, demand impacts, [[Finance:Marketing plan|marketing]] actions and sales actions, [[Social:Procurement|procurement]] and supply plan, supplier [[Finance:Lead time|lead time]], constraints from the supplier and other information, supply capacity, production and [[Engineering:Capacity planning|capacity plan]], [[Social:Inventory|Inventory]], work-force level, operational constraints, production lead time, flexibility, contingencies, distribution plan and distribution capacity, lead time for the delivery, transportation status, service level targets, constraints, budgets. <ref name=":0" /> 

== Output of S&OP ==
The main output from S&OP is the integration of the plans of Marketing, Sales, Operations and Finance. The integration of plans is allowed by the [[Social:Cross-functional team|cross- functional integration]] fostered by S&OP. The integration is different from coordination: in fact, it takes in consideration the target while the coordination takes it for granted. To achieve the integration the main precursors are: informational quality (it’s important that the information for the decisions is appropriate in terms of content and in the form), procedural quality (the rules at stake are clear for all the departments involved), alignment quality (the synchronization of the goals and the actions which gives to the company a best image to the eye of the customers, suppliers, [[Social:Stakeholder (corporate)|stakeholder]]), constructive engagement (the participants are proactive in the process and defend their interests. A high level of constructive engagement leads to greater level of S&OP [[Physics:Effectiveness|effectiveness]]).<ref>{{Cite journal |last1=Oliva |first1=Rogelio |last2=Watson |first2=Noel |date=2011 |title=Cross-functional alignment in supply chain planning: A case study of sales and operations planning |url=http://doi.wiley.com/10.1016/j.jom.2010.11.012 |journal=Journal of Operations Management |language=en |volume=29 |issue=5 |pages=434–448 |doi=10.1016/j.jom.2010.11.012}}</ref>

== Goals of S&OP ==
The goals of S&OP could be classified in these categories: alignment and integration, operational improvement (improvement of the operational performance, improve forecast accuracy), results focused on a single perspective (for instance, improve [[Supply chain|supply chain]] performance, improve customer service), results based on trade off (for example, optimize customer service versus [[Social:Inventory|inventory]]), end results (such as [[Finance:Gross profit|gross profit]], [[Finance:Contribution margin|contribution margins]]).<ref name=":3" />  Many authors, including Patrick Bower have written on how S&OP creates value in the supply chain.<ref>{{Cite web |title=How The S&OP Process Creates Value In The Supply Chain {{!}} How The Sop Process Creates Value In The Supply Chain 763 {{!}} IBF |url=https://ibf.org/knowledge/jbf-articles/how-the-sop-process-creates-value-in-the-supply-chain-763 |access-date=2023-02-14 |website=ibf.org}}</ref>  

== Implementation ==
The implementation is driven by the means of maturity model of S&OP. There are different maturity models proposed in the literature in function of the type and number of dimensions (mechanisms) considered and the type and number stages of evolvement. The role of these models is three-fold: descriptive for the implementation, prescriptive (to understand which is the current state and which are the following stage to be reached), comparative (to benchmark the maturity stage of the company versus the competitors).<ref>{{cite journal |last1=Danese |first1=Pamela |last2=Molinaro |first2=Margherita |last3=Romano |first3=Pietro |title=Managing evolutionary paths in Sales and Operations Planning: key dimensions and sequences of implementation |journal=International Journal of Production Research |date=4 March 2018 |volume=56 |issue=5 |pages=2036–2053 |doi=10.1080/00207543.2017.1355119|s2cid=117187253 }}</ref> A maturity model, suggested in the academic literature, is composed by five dimensions and five stages. The five dimensions are related to: [[Social:Meeting|meetings]] and collaboration, organization, [[Social:Performance indicator|measurement]], [[Engineering:Information technology|information technology]] and S&OP plan integration. The stages, along with these dimensions evolved, are: no S&OP process (stage 1), reactive (stage 2), standard (stage 3), advanced (stage 4), proactive (stage 5).<ref name=":2">{{cite journal |last1=Grimson |first1=J. Andrew |last2=Pyke |first2=David F. |title=Sales and operations planning: an exploratory study and framework |journal=The International Journal of Logistics Management |date=13 November 2007 |volume=18 |issue=3 |pages=322–346 |doi=10.1108/09574090710835093}}</ref>

There is another maturity model which suggests four dimensions and six stages of evolution. The dimensions are: process effectiveness (in terms on how the right things are doing for S&OP), process [[Physics:Efficiency|efficiency]] (how the things are doing right with minimum effort), people and organization and information technology. The stages of evolution are: undeveloped (level zero), rudimentary (level one), reactive (level two), consistent (level three), integrated (level four), proactive (level five).<ref name=":1">{{cite journal |last1=Wagner |first1=Stephan M. |last2=Ullrich |first2=Kristoph K.R. |last3=Transchel |first3=Sandra |title=The game plan for aligning the organization |journal=Business Horizons |date=March 2014 |volume=57 |issue=2 |pages=189–201 |doi=10.1016/j.bushor.2013.11.002}}</ref>

== Enablers and barriers ==
In the literature are pinpointed, not just for the implementation, but also during the conducting of the process, several enablers and barriers. The main enablers are the following: the capacity to learn from previous mistakes, the ability to make changes, the discipline, the existence of an S&OP department, the top management support, the cross-functional integration, the performance evaluation, the information system, the training on S&OP, the commitment of participants, well assigned roles and responsibilities, impartiality in the conducting of the process.The main barriers indicated are: the presence of siloed culture, inadequate information technology, lack of participation or irregular attendance at meetings, difficulty to reach a joint decision during the meetings.<ref>{{Cite journal |last1=Pedroso |first1=Carolina Belotti |last2=da Silva |first2=Andrea Lago |last3=Tate |first3=Wendy Lea |date=2016 |title=Sales and Operations Planning (S&OP): Insights from a multi-case study of Brazilian Organizations |url=https://linkinghub.elsevier.com/retrieve/pii/S0925527316302286 |journal=International Journal of Production Economics |language=en |volume=182 |pages=213–229 |doi=10.1016/j.ijpe.2016.08.035}}</ref>

== See also ==
* [[Social:Supply chain management|Supply chain management]]
* [[Social:Collaborative planning, forecasting, and replenishment|CPFR]]
* [[Finance:Supply and demand|Supply and demand]]
* [[Forecasting]]
* [[Demand chain]]
* [[Social:Demand chain management|Demand chain management]]
* [[Finance:Sales management|Sales management]]
* [[Finance:Sales operations|Sales operations]]

==References==
{{reflist}}

== External links ==

*{{cite web|author=Palmatier, George E.|url=http://georgepalmatier.com/white-papers/sop-article.pdf|title=The Need to Lead|year=2007}}
*{{cite web|title=The Evolution of S&OP |author=Dick Ling, Andy Coldrick and Chris Turner|url=https://www.stratabridge.com/news/sept03_s_op_evolution.pdf|year=2003}}
* {{cite web|url=http://www.stratabridge.com/2011/09/joined-up-decision-making-whats-your-perspective/|title=What's Your Perspective?|year=2011|access-date=2015-09-17|archive-date=2017-12-29|archive-url=https://web.archive.org/web/20171229015119/http://www.stratabridge.com/2011/09/joined-up-decision-making-whats-your-perspective/|url-status=dead}} An article outlining the different perspectives that should be considered when designing an S&OP process

A series of papers authored by Dr. Larry Lapide of the MIT Center for Transportation and Logistics:
* [http://ctl.mit.edu/sites/ctl.mit.edu/files/library/public/article_jbf_soplanningi_lapide.pdf Sales and Operations Planning Part I: The Process]
* [http://ctl.mit.edu/sites/ctl.mit.edu/files/library/public/article_jbf_soplanningii_lapide.pdf Sales and Operations Planning Part II: Enabling Technology]
* [http://ctl.mit.edu/sites/ctl.mit.edu/files/library/public/article_jbf_soplanningiii_lapide.pdf Sales and Operations Planning Part III: A Diagnostics Model]

A series of practical papers authored by Robin Goodfellow and Ian Henderson of MLG Management Consultants:
* [http://www.mlg.uk.com/html/sales_and_operations_planning.htm An overview of S&OP and how to make it most effective]
* [http://www.mlg.uk.com/html/mlg_papers.htm Executive S&OP - a series of breakfast briefings undertaken with the UK's Institute of Operations Management]
* [http://www.mlg.uk.com/html/mlg_papers.htm Brief article on the need for and ways to succeed with S&OP]

A series of infographic images authored by Jay Sharma of SupplyChainPro Consultants:
* [http://visual.ly/sop-agenda An Infographic of an example agenda in a S&OP Meeting]
* [http://visual.ly/infographic-road-sop-maturity An Infographic of a S&OP Maturity Model detailing key elements of different S&OP phases]
* [http://visual.ly/infographic-sop An Infographic of the key planning elements within S&OP and their inter-relationships]
* [http://visual.ly/4-things-consider-you-sopify An Infographic on key questions to address before a company implements S&OP]
* [http://visual.ly/infographic-whats-so-difficult-about-sop An Infographic depicting key areas related to culture change for supporting S&OP]

[[Category:Supply chain management]]
[[Category:Sales]]
[[Category:Production planning]]

{{Sourceattribution|Sales and operations planning}}