Sales and Operations Planning: The business process Canadian manufacturers can’t afford to ignore
Canadian manufacturers that sideline Sales and Operations Planning (S+OP) could be risking lost revenue. According to Gartner, demand-driven S+OP processes can boost revenue from 2 to 5 percent—and reduce inventories by 7 to 15 percent.
What is Sales and Operations Planning?
S+OP bridges the gap between your strategic and tactical planning. It brings all your departmental business plans together into one cohesive, integrated plan.
This allows you to continuously refine and synchronize all of your planning—in order to meet any organizational and marketplace changes that may occur. S+OP is a key business process that could mean the difference between a successful year and a poor one.
How does Sales and Operations Planning work?
S+OP balances supply and demand by using aggregate product families in monthly buckets for up to an 18-month period. Quite often a mature S+OP process can act as an input copy to the budget. This process reconciles the demand and supply side of the business, to create a unified business plan.
For example, if you experience a sales spike during summer you may have capacity issues that require you to pre-build inventories. The S+OP process would determine when and how much.
A typical S+OP process involves:
- Running monthly sales reports and establishing a new sales forecast
- Reviewing plans and getting leadership sign-off
- Conducting the supply and demand process
- Preparing for and holding the Executive S+OP meeting
Why should you consider it?
If you are like most businesses, you create your annual budgets and fixed annual operating plan for the year, and then walk away. However, things change:
- Seasonal products often take longer to plan and produce
- Business conditions change
- Operations may create new plans that impact the budget
- Sales may uncover new opportunities that have not been budgeted for
- New product launches may require additional resources
An effective Sales and Operations Planning process empowers you to make the right decisions to drive growth, while enabling cross-functional teams to be as productive as possible. You can proactively manage supply and demand to keep a good balance.
What are the benefits?
S+OP enables better integration of your strategies, capabilities and goals across sales, marketing, operations, research and development, finance, and other departments.
The critical factors to consider for Sales and Operations Planning
A successful S+OP process involves:
- Creating a process for documenting and transferring any captured knowledge
- Ensuring the executive leadership is both engaged and willing to drive the process
- Gathering and communicating consolidated information to cross-company stakeholders
- Providing adequate training, resources and support to help sustain the process
The four steps to a successful planning process
- Establish a formal S+OP process to improve inter-departmental co-ordination
- Employ segmentation to drive demand by determining accurate forecasts and dealing with supply chain variability
- Leverage modern technology to see through effective S+OP from start to finish
- Establish key performance metrics for continuous S+OP improvement
If you want to learn more about how Sales and Operations (S+OP) Planning connects the strategic planning to the tactical planning of the business, download your complimentary eBook, PLANNING IS NOT DEAD—THE RESURGENCE OF SALES AND OPERATIONAL PLANNING: A PLAYBOOK FOR MANUFACTURING LEADERS, by filling in the form on this page.