Step by Step Guide to Implementing Sales and Operations Planning
Sales and operations planning identifies customers’ buying habits to ensure that an organization can meet the anticipated production of goods and the demand across all distribution centers.
Suppose companies have disorganized sales and operations planning. In that case, there is a chance of incorrect forecasting, missed sales opportunities, inessential stock levels, excess amounts of stock, and other issues due to a shortage of communication and alignment. The breach in the planning process can negatively affect the company’s performance and needs to be solved. This is where the S&OP is utilized, and the sales and operations planning software is leveraged.
What is Sales and Operations Planning?
Sales and operations planning is a supply chain process that is designed to help supply chain executives comprehend things such as:
- Understanding and producing planning adjustments related to imminent sales and operations operation challenges.
- It also aids in balancing demand and supply plans for mid to long-term planning.
- Examining investments and proposals that are related to exiting or entering a market
- Inspecting proposals and investments which are concerned with getting new suppliers onboard.
- Aligning demand and supply strategies for mid to long-term planning.
- Assuring that the company’s KPIs and annual operating strategies are satisfied while selecting a consensus plan.
- Efficiently launch new products and phase out old products.
Supply chain planners create and execute the sales and operations. However, communication amongst departments is necessary for the operations to be successful. Departments such as procurement, sales, marketing, operations, engineering, and finance should offer the essential data and work in unison. Sales and operations planning software enable executives to make informed decisions with a unified collection of plans across the organization. These steps are organized every month, but there are inputs every week from important participants. The method helps to effectively manage the supply chain and organize the resources to meet consumer demand while gaining profits.
Steps of Sales and Operations Planning
The main objective of S&OP is to increase visibility and transparency, match the demand and supply side and enhance revenue and sales. The process functions best by leveraging the sales and operations planning software that can track massive datasets and improve collaboration between departments.
- Product Review – The planners incorporate R&D, product development, and new product introductions while inspecting the quality of goods in the market, examining product pipelines, and reaching conclusions related to product planning. The procedures include setting dates for manufacturing or recognizing important projects and allotting resources. Other concerns in the initial phase include the impact on existing products when a new product is introduced into the market.
- Demand Review – The aim of the second phase is consensus demand planning that includes an overview of independent and dependent demand. Aspects influencing dependent and independent demand involve marketing, consumer trends, product hierarchy, and new product introduction. Consensus demand planning is based on a combination of product plans, sales, and marketing. The demand plan is planned in terms of revenue or unit. Statistical forecasting includes customer inputs and marketing plans for modifying, predicting, and reaching a consensus. Historical data is considered in the plan, and the demand plan is balanced against the results of the finance review to locate any demand gaps.
- Supply Review – A supply plan is generated that matches the demand plan. Usually, these plans work in unison, and the supply plan requires balancing customer service and reducing inventory and operational costs. Production and capacity plans are developed to replace supply strategies while considering demand capacity and fluctuations. It is essential to have sales and operations planning software that can function with real-time data. The situations are not similar to the “what-if” questions in long-term circumstances. All the functionalities are the same and can be used to reduce risk and understand the disadvantages and advantages of various alterations. These situations include inventory rebalancing, onboarding a new supplier, etc. These situations are automatically connected to financial needs.
- Finance Review – This phase aims to create baselines that become alterations to demand, supply, and product review in addition to the data leverages in pre-S&OP and the executive S&OP reviews. The budgetary data for the last month is amalgamated to provide inputs to inspect the current month’s S&OP cycle. This step is essential for financial concerns and involves several categories and views such as product, geography, customer, and channel. Actual costs are balanced against budgets and forecasts to inspect forecast accuracy in a specific time. The budgetary analysis is essential in generating inputs in the pre-S&OP steps and the executive S&OP process.
- Pre-S&OP – Several meetings with authorities at various levels display the interconnectedness of product, demand, supply, and finance strategies. These gatherings are pivoted around a cloud-based system that has all the plans in a single place. The purpose behind pre-S&OP is to identify gaps and generate plans for tackling these issues. The plans are re-examined in shared dashboards, and the actual versus variance is analyzed while keeping track of the budgets and targets. Aspects such as revenue, profit, and inventory are examined to comprehend the economic and operational influences because of the decisions. Modifications are then done in real-time.
- Executive S&OP – The ultimate step of the S&OP brings together all the information and strategies on a cloud-based platform to be leveraged in executive S&OP meetings. “What-if” circumstances and risks are revisited, and decisions are considered so that the authorities can make appropriate choices at the right time. Any issue that remains unresolved in the first five steps is considered, and the reason for escalation is examined. Decision deadlines are established after that.
Fountain9 provides a robust sales and operations planning software that helps food and D2C businesses eliminate wastage and losses because of out-of-stock situations and increases profits. It also helps businesses maintain a properly stocked inventory with high availability to satisfy consumer demand.