Sales and Operations Planning – S&OP

We all probably heard about this concept if not from applying it through friends and colleagues in other industries, Most of the companies has a vision and mission statements and a Strategy plan of where they want their companies to be within the next 3-5 years ,ex of mission statement: To connect the world’s professionals to make them more productive and successful.

How to make this plan work is in strategy where Finance , Sales ,Marketing and Supply chain and top management set sales dollars value through extrapolating and using macro -economic leads  and other qualitative methods to set there long range plan 3-5 years for the company which will result in x percent growth within the next3-5 years or x market share growth within the next 3-5 years and this needs x production units and capacity requirements.

Moving through the hierarchy next step is a sales and operations plan which turns those strategic plan values into more realistic and mid-range time frame 12-24 months rolling forecast overview , transferring inputs from sales , marketing promotion uplifts and new product initiatives and base line forecast through history and real time data of demand planning , financial statements into one consensus plan can be done through an ERP system or spread sheets depending on Company size ,product and type of business.

Sales and Operations Planning: how the process works?

S&OP is a continuous process of collaboration between all departments to reach company top and bottom line targets and continuously improve communication between departments and forecast accuracy parameters of error and bias , Reaching a reliable Supply: production and material plan , have a yearly promotion plan for company products and a financial projection for 12-24 months ahead.

To summarize steps should be followed with 2-4 meetings a month a calendar shared with reminder to all concerned parties ,Agreed deliverables from all concerned departments with deadlines to make the process work , here is a frame work which can differ depending on the business and product type.

• Receiving real time data of sales from the markets and consolidation (1-3^rd ) day of the month
• Sales , Marketing and demand create rolling 12-24 months forecast (4^th-6^th ) day of the month
• Finance projects scenarios of the plan for 12-24 months ahead with profit and loss and operating income . (6^th-9^th ) of the month
• Supply works on tentative production and capacity plan (12-24) months (9-12^th) of the month
• Plan consolidation through demand planning department. (12-13^th)
• First pre S&OP meeting with demand planner leading and moderating with members of sales ,marketing, finance and supply chain as main attendants to agree on consensus plan and identify potential risks and opportunities of the plan with focus on the coming quarters promotions and any new product innovations if available. (14^th of the month)
• Executive S&OP with CEO attendance , Head of Marketing ,Sales ,Supply Chain and Finance, Demand Planning to sign off the master plan and take approvals and guidance at potential risks or any plan disruptions like tender quantity or special order for a customer that needs a change in the consensus plan. (16^th of the month)
• Orders received from suppliers and distributors to cover the agreed consensud plan for the next quarter to start production , material and logistics plan turning consensus plan into reality. (16-20^th) of the month
• Closing order receiving period to start implementation. (25^th of the month)
• Plan repeated each month with discipline , support from top management and measuring set of Key performance indicators (KPI’s) to see the progress of the plan.

Monitoring Sales and Operations Planning progress KPIs:

• Achieving top and bottom line monthly ,quarterly goals (Finance)
• Improvement on forecast error and bias monthly on product family levels focusing on top selling sku’s 80/20 rule. (Demand)
• Adherence to production plan and achieving it measuring productivity and efficiency levels. (Supply )
• Pre and post promotion sales analysis . (Marketing)
• Stock out , Over stock analysis in different markets . (Sales,Finance,Demand)
• Cost savings through strategic sourcing. (Material-Procurement)

Working as a team and commitment to the process and continuous tweaks and improvements to the plan by factoring the errors in the forecast to have better results is the key to success.

Mr. Ahmed El Hamamsy
S&OP Lead and Planning Manager.