Sales & Operations Planning

Many manufacturers have attempted to manage their supply chain more effectively through Sales & Operations Planning (S&OP). Sales and Operations Planning is a process, not an event. This process is meant to develop and evaluate the numerous tactical strategies available to the business, choose the one that contributes the most toward realization of the firm’s long-term objectives, and measure the actual performance versus the plan.

There are just three topics that need evaluation and consensus in most firms. Production is needed to support the expected level of Sales and maintain a buffer Inventory — PS&I. In manufacturing firms, Production is the major operations activity, Sales and Marketing forecast what is needed because they are close to the customer, and Inventory is important because it is a result of the interaction of the first two and is almost always one of the largest items on the firm’s balance sheet.

The capstone to this process is a monthly or quarterly meeting during which the plans are analyzed, discussed, and validated. The emphasis in this meeting is on validation, since most of the decisions are taken based on objective measures and the real body of analysis is done at a level once removed from the key meeting attendees. Meeting attendees should include representatives from every aspect of your enterprise involved in any way with your supply chain.