The Principle Elements of Sales and Operations Planning
Maintaining a sustainable manufacturing facility is no ordinary task. At times, the difficulty of it can seem like a high-wire act. In fact, were manufacturing processes not primarily carried out within the confines of a warehouse, the Big Top would be a fitting replacement, as pulling it all together requires the balance of a trapeze artist or Cirque Du Soleil performer.
But accomplish it they do, and while the feat may not always be easy, it can be made simpler through sales and operations planning, or S&OP. What is S&OP? What are the steps involved and who are the actors that contribute to this all-hands-on-deck effort?
What is S&OP?
From a process standpoint, manufacturing is primarily composed of two elements: supply and demand. The goal is to produce at a rate that’s roughly in line with the rate at which a product or service is consumed. Sales and operations planning is designed to marry those factors so that they align with a business’ long-term strategic goals from a standpoint of profitability. The American Production and Inventory Control Society (APICS) puts sales and operations planning a bit more succinctly, describing it as “the function of setting the overall level of manufacturing output and other activities to best satisfy the current planned levels of sales.”
Furthermore, as APICS defines it, S&OP involves the recognition of general business objectives as they pertain to the supply chain, such as profitability, customer lead times, and inventory management. For instance, to diminish backlog, manufacturing facilities may seek to consolidate resources to produce more efficiently and reduce waste. S&OP lays out how this will take place and what steps are involved in the process.
While manufacturing facilities may deploy sales and operations planning for different business purposes or goals, each process is composed of a few central pillars. They include the following:
To get a sense of how supply and demand are working relative to one another and are harmonious with your company’s objectives, you must have something to measure. That’s what the first step is all about. Whether it’s inventory, recent sales, or cash on hand, data is gathered and aggregated to identify trends and see how they align with corporate goals. It’s important that this data be as accurate as possible, as the process moving forward hinges on what the facts are on the shopfloor. In short, the outcome at the end largely depends on what information is available at the very beginning.
Assemble key stakeholders
“The data that’s compiled will largely dictate the stakeholders to assemble.”
Manufacturing companies are multilayered, involving personnel in many different divisions, such as fabrication, customer service, processing, delivery, quality control as well as research development. Since the goal of S&OP is ensuring supply and demand aligns with the company’s long-term goals, representatives from each division should be represented during S&OP meetings to interpret the data that’s complied. The data that’s compiled will largely dictate the stakeholders to assemble. The frequency of these meetings is also contingent on what’s being assessed, such as sales, production, development or customer satisfaction.
As its name implies, demand is the focus in this phase of S&OP. Virtually every aspect of demand is examined here. For example, questions may include how a particular product sold during a given period of time (e.g. monthly, quarterly, yearly), if the demand was in line with expectations or what actions may be needed to increase the desirability of a product if demand was weak.
Supply and demand are the ultimate pairing: Each is heavily contingent on the other. Here, supply issues are reviewed both as they currently exist, what happened previously and how it will look in the days ahead. For example, if demand were to improve, would the facility have the requisite needs to produce at a higher rate to avoid shortages? What will the costs be? What processes need to be honed to ensure efficiency? These are just a few of the questions asked in this portion of sales and operations planning.
Reconcile and assign
The last step in S&OP is putting it all together so the collective goal is put into motion. For example, if stakeholders need to be reassigned or new responsibilities are required, what that actually looks like is fleshed out in this phase. Additionally, if stakeholders have questions or issues, they would make mention of them so everyone is on the same page.
As the old saying goes, a failure to plan is a plan to fail. Sales and operations planning provides the roadmap for developing a harmonious strategy that can help you achieve success. Manufacturing involves many working parts. Depending on your company’s size, you may only interact with the individuals that are within your department. S&OP allows stakeholders from each unit to see how everyone else is doing so the appropriate modifications can be made. And at USC Consulting Group, we can help you make S&OP more than mere meetings, but productive meetings of the minds. Regardless of the challenge you face, we can offer strategic insight to help you reach your operational goals.
Please contact us to learn more and experience the USC Consulting Group difference.