What is the purpose of sales and operations planning How doe

What is the purpose of sales and operations planning? How does the S&OP process enter into the planning process? What value is it to organizations?

Solution

Company wants to achieve its goals through operational capabilities. But many times, different departments are having different sets of KPI and different forecast of demand. Planning based on this to achieve goals is very difficult. Bad planning is as good as no planning.

Sales forecast is mostly on the assumption of revenue maximization whereas operations forecast is mostly on cost optimization. These are the conflicting forecast pattern leads to the bad planning across organization.

Sales & Operations Planning (S&OP) tries to build consensus among sales and operations departments and tries to generate plan which is accurate, consistent and common assumptions. This helps company to better align resource and respond to the new opportunities.

Many companies use silo approach to prepare the planning. But in this globalization and increase in the complexities in the supply chain it is difficult to plan in the silo way. This is most in-efficient way of planning. S&OP give way integrated way of planning.

S&OP helps in determining balance between supply and demand and optimizing available resources.

Enterprise can gain wider value by using S&OP along with demand planning, Aggregate Supply Planning, Capacity Planning (Constraints), Inventory Planning & Optimization and Inventory Management

S&OP can transform the business in the following way-