Sales and Operations Planning (S&OP) | Tools To Run Your Business

S&OP (Sales and Operations Planning) is not a computer system that can, at a flick of a switch, resolve your business issues. S&OP is a way of life, a way to help control your business, presenting the ability to formulate objectives at suitable levels of detail to ensure inventory levels are met, production schedules can (or cannot) be achieved and most importantly sales plans can be met.

Using S&OP as a tool

Having had many years experience at running an S&OP process the key is to become disciplined in the way it is approached. You need to know what your sales people are doing, ensure they submit both forecasts and deforecasts (and have tools to track if they are doing what they should do), collect data, analyse and share the information down the supply chain to ensure demand can be met by the capacity that is available in production or service areas.

S&OP can also be used not only to drive volume estimates, but it can also be a critical tool to drive revenue forecasts as well. 

S&OP Planning

Sales & Operations Planning is a key alignment process that can bring all relevant areas of the business into position to meet business objectives. The process can enable organisations to achieve business growth and at the same time, depending on the forecasting horizons, define clearly what is going to happen in the future. This can help build sufficient capacity for a growing business or just a critical, identify where lower capacity is required and thus forward plans can take a new direction in order to bring costs in line with the market place decline.

At manufacturing level, the S&OP can help develop rough cut capacity planning which in turn can cascade further down as far as raw material procurement. The S&OP is the master tool for balancing the business and if managed correctly can be one of the most critical elements in a business tool box.

Business Operations

If you are new to the S&OP process, it can actually be started in a very simple way with the use of market intelligence, sales data, requirements data (which can be calculated if you have the sales and forecast data) all in an excel spreadsheet. If you have multiple sites, then through spreadsheets the consolidation of the data can be easily achieved by a person with intermediate knowledge of worksheets.

You have to have the passion to follow the process through and have the support of the company’s management. If you do not have this, then there is a chance that all the good work you put in, could actually result in nothing. 

Management Buy-In

When creating S&OP plans ensure there is senior management buy-in as it gives the whole process suitable credibility. Key performance measurement (otherwise known as “KPM’s” or “KPI’s”) can ensure that the execution of the S&OP meets the expectations and performance of the business e.g. you plan to meet 98% stock availability by forecasting in your S&OP and creating suitable statistical replenishment plans to hit the probability of 98%. The theory of the S&OP should be understood by all right from the CEO down to the shop floor worker; everyone is aligned to meet the company’s objectives.

Supply and Demand

It is always a balancing act in terms of demand and supply. Businesses, in order to keep unit manufacturing costs at their lowest possible levels obviously want to keep their order books as full as possible. S&OP should not only be just a spreadsheet full of numbers; the process relies on excellent communication between sales and manufacturing in order that everyone benefits.

Poor forecasts can influence a business’s success; forecasts that are too high can result in over utilisation of manufacturing and rising inventory as sales do not materialise. Forecasts that are too low and the businesses credibility can be severely affected as sales people will not hit their commissions and more importantly customers are let down. The ultimate issue could be that if you are a public limited company, then your share holders could be asking some serious questions on how the company is being run.


Forecasting is probably the most key element within the S&OP process. Business intelligence, Customer Relationship Management and dialogue with sales are all elements that should be used to acquire excellent forecasting performance.

If you are developing a forecasting tool at this moment in time, I would certainly recommend it has a feature that can measure demand versus forecast and if possible an output (report) which can advise you of the forecast error being given every month (or whatever your forecasting time period is that is critical to your business).


If you have not already done so for your business, no matter how large or small consider introducing an S&OP process. Keep it very simple and one that can be maintained on an ongoing basis. If you have CRM or other information, ensure you use it to build a forecasting profile. The process will assist in ensuring all elements of the business are in alignment and it will flag any business critical issues, even ones that may be occurring in two years time!

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