IMPLEMENTING A SALES AND

OPERATIONS PLANNING (S&OP)

PROCESS

Implementing Sales and Operations Planning (S&OP)

In our knowledge article What is S&OP?, we explained what sales and operations planning
(S&OP) is and its many advantages. To sum up, S&OP is the creation of a unified,
consensus-based business plan that enables organizations to control inventory costs while
vastly improving service levels. In this article, we define a typical S&OP process and will
explain how to implement the process.
According to IBF, S&OP is a process that coordinates different areas of the business to meet
customer demand with the appropriate level of supply. When establishing your process, it is
important to consider who will be responsible for each step of the process. You will also want
to set expectations for hand-offs, meetings, and how you will communicate changes.
Effective S&OP planning depends on the input. But it’s important to keep in mind that in
order to move forward with a monthly S&OP plan, you must determine at which point in the
month edits to the demand plan will no longer be allowed.

Use the following process overview as a template to define roles, responsibilities, and timing
of each step after the close of each month. The steps and responsibilities should then be
loaded into a shared calendar with reminders, meetings, and attendees (responsibility)
scheduled. Steps that are not tied to the beginning of the month and are managed on an
ongoing basis are noted with the designation: On-Going.

Typical S&OP Process

S&OP Roles and Responsibilities

Executive Management – CEO/Leader

 Chairs the executive S&OP meeting and serves as ultimate decision-making
arbiter
 Holds organization accountable to plan
Is the primary contact for dispute resolution throughout the S&OP process
Sales & Marketing Leader
 Sets expectations with sales team members that they are going to perform sales
forecasting and work to improve forecast accuracy
 Owns and speaks to sales performance and forecasts in the executive S&OP
meeting
 Ensures that forecasting is a monthly (or periodic) process
Is the primary contact for issues related to strategic sales/customer decisions
Demand Planner
 Presents the demand plan information in a timely, accurate, ready-to-use
condition
 Does some of the pre-plan analysis and statistical forecasting
 Interacts with sales to complete data collection and demand planning
 Focuses on issues and addresses any disconnections with the future forecast
Is the primary contact for issues related to roll-up of sales forecasts, analysis of forecasts
and development of ultimate demand plan
Sales Personnel
 Gather intelligence from assigned customers and integrate findings into demand
planning
 Perform sales forecasting for their assigned customers, markets or other sales
segmentation
 Must know the actual vs. forecast performance for sales, the reasons, and the
corrective actions
 Update the sales forecast monthly and speak to the above in the corporate sales
review meeting
Each individual is the primary contact for issues related to sales forecasts for their
particular customer and segments
Operations Leader
 Sets the expectation with the production and materials team that they will help
with developing the supply plan according to the process and run to that plan
 Ensures the aggregate level data to be presented is linked to all of the derived
detailed planning
 Chairs the monthly or periodic supply planning meeting
 Speaks to inventory and backlog performance versus forecast in the executive
S&OP meeting
 Presents the actual vs. forecast performance for inventory
Is the primary contact for issues related to strategic operations/supply decisions
Supply Planning and Master Scheduling
 Updates the inventory plan monthly or periodically
 Maintains safety stocks, production rates, vendor performance, lead times and
other supply planning attributes
 Speaks to the inventory detail in the supply planning meeting
 Reviews orders, due dates, and inventory and determines via analysis what to
build, when to build, and where to build per the supply plan
Are the primary contacts for issues related to orders, inventory, and the supply planning
process
TIP – Develop a RACI Matrix to quickly identify the roles and responsibilities of each
individual/team in the S&OP process.

Step 1: Gather and Manage Data

This step entails the collection of data on past sales, trend analysis, and assessments of
forecast accuracy. Advanced S&OP planning software can handle many of these tasks
through automated data upload processes and built-in reporting. Additional data maintenance
steps noted in the steps below must be performed manually on an ongoing basis, as needed.

The Demand Planner is typically responsible for leading this step in the process. Key inputs
for this step will come from sales and marketing, but input from operations/supply, logistics,
and finance should also be considered.

Sub-steps:
a. Manage New Items or Existing Item Changes (On-Going). This includes
linking an existing finished goods item to a new existing goods item, along with
assigning new items to the planning hierarchy and entering dates for discontinued
items.
b. Run Analytics. If your supply chain planning solution provides an analytic
function, run it at this point. As an example, go here to see how to run analytics
in DemandCaster. Solutions such as DemandCaster also enable you to schedule
analytics on an automated basis.
c. Review Performance Measures. Determine which performance measures you
wish to capture for planning purposes. Get appropriate input from sales and
operations as needed.
d. Adjust Item Level Supply Attributes. This entails:
 o Setting appropriate supply policies, such as stocking requirements,
lead times, etc., which should be reviewed monthly.
o Determining the type of supply planning to apply: Demand Chase or
Level Load.
 Demand Chase means that supply increases and
decreases with demand on a period-by-period basis.
 Level Loading means supply is level loaded between a
beginning and ending inventory target.
Step 2: Develop Demand Plan

Demand planning includes validating forecasts, understanding sources of demand, accounting

for variability, and revising customer service policies. Additionally, it encompasses the
inclusion of promotion plans, one-time events, and new product and customer launches.

The Demand Planner will be responsible for developing the Demand Plan, but sales and
marketing should be consulted for input and verification.

Sub Steps
a. Create an S&OP Review Report. Supply chain planning software that has built-
in reporting functionality enables you to run custom reports.
b. Share Reports for Input (recommended). Distribute reports to sales or other
participants to build consensus.
c. Edit Demand Plans as Required. Incorporate input from performance measure
reviews, any sales related information, and edit demand plans accordingly. Also
consider establishing a freeze period that’s approximately equal to the longest
cumulative lead-time be established to prevent editing of demand plans within
that time period.
d. Review and Finalize Consensus Demand Plan. This review takes place during
the monthly demand planning review meeting with sales. It includes reviews of
the past month’s performance and sales data, along with quantitative-based
assumptions behind the numbers.

Step 3: Supply Planning

Supply planning involves translating the demand plan into an appropriate supply plan.
Among its tasks are determining inventory targets, safety stock levels, and production
methods for level loading and demand chase. It also includes assessing the ability to meet
demand by reviewing available capacity, inventory, and operations scheduling.
Head of Supply will be responsible for the creation of the Supply Plan. Key staff from
manufacturing, operations, logistics, and finance should be consulted for input and
verification.

Step 4: Reconciliation of Plans | Pre-S&OP Meeting

This step occurs during the monthly pre-S&OP meeting. It entails sorting through supply-side
issues to determine if the sales plan can be accommodated and inventory and backlog
objectives can be met. Additional tasks include reviewing supply performance from the
previous month and presenting forecasts.

The S&OP leader is typically responsible for the efficient execution of this meeting. Key
participants include sales, marketing, operations, logistics, and finance.

Step 5: Approve and Release | Executive S&OP Meeting

Once the demand and supply plans are reconciled and finalized, the result is presented to the
executive team during the monthly Executive S&OP meeting. The output of the meeting is an
approved demand and supply plan that can be efficiently executed by operations.

The S&OP leader will oversee this meeting/step in the process, but the Executive Sponsor is
a required participant and will be needed to finalize all decisions/outcomes of the meeting.

Sample Agenda for Executive S&OP Meeting

Review S&OP calendar – critical dates

S&OP aggregate summary

 Actual to plan budget, sales, supply

 Performance metrics – on time, stock-outs, and inventory levels (excess
and obsolete)
 Review applicable action items related to this section
Last Month Performance – actual to plan review by category

 Sales and operations deltas

 Causals
 Inventory
 Utilization
 Review applicable action items related to this section
 Review 12-month rolling demand and supply plan by category including;

 Short-term concerns
 Capacity and scheduling challenges and plan of action
 New products introduction
 New or lost critical customers
 New or lost critical suppliers
 Product transfers from one facility to another
 Inventory and supply projections and targets
 Other major risk factors in the business
 Review applicable action items related to this section
Summary of new action items

Final approval

S&OP carries enormous benefits in terms of lower inventory costs, higher productivity, and
greater customer satisfaction. Top supply chain planning solutions, such as DemandCaster,
increase advantages further still by enabling you to use the S&OP plan to drive requirements
planning and also to move straight from planning to execution.