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What is S&OP (Sales and operations planning) ?

Sales and operations planning
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Summary: S&OP is an essential process for the manufacturing industry. Planning your entire demand and supply process will eventually incerese your company’s profitability. A study by Gartner says that if S&OP is planned and executed correctly, there will be increased revenue and productivity. Any company or organization struggling to succeed has to adopt the entire S&OP process in the company.

S&OP can be expanded as sales and operations planning. It is a process of making decisions about the supply chain process by executives. S&OP is the process of balancing out supply and demand. The executive makes decisions on:

  • Planning mid to long-term regarding the demand for the product.
  • Analyzing the challenges regarding the sales and operation execution process (S&OE).
  • Introduction of the new product and withdrawal of the old product.
  • Getting insights and analyzing new suppliers.
  • Inspecting investments or proposals regarding entering or exiting markets.

The decisions are planned and executed by the supply chain leaders every time. But even other departments involved with the supply chain process cooperate in making planned decisions. Finance, marketing, procurement, manufacturing and engineering and operations are the departments involved in the S&OP process.

What is the goal of Sales and Operations Planning (S&OP)?

A well-structured plan is crucial for any organization. So when it comes to sales and operations planning, a 360-degree view of all the insights gathered on the supply chain process will increase productivity and revenue.

For example, if your business data is disorganized, how will you find a solution or predict the prospect of your company? Likewise, with a well-organized and structured statistical business report, it will be easy to identify the issues and find possible solutions.

So, Sales and operations planning(S&OP) aims to plan the supply chain process to avoid bottlenecks, balance workflow and increase the value and service. Companies who want to excel in Sales and operations planning abilities should implement supply chain software solutions.

Supply chain software solutions automate all the processes to increase workflow, productivity and profits.

Collaboration with other departments

In sales and operations planning, it is vital to include other parties. A senior executive leads the S&OP team. The Supply chain process also has other business departments – finance, distribution, marketing, and sales. Together they share inputs and devise a brilliant plan to ace the supply chain process.

In S&OP software, data is stored in silos. Executives can access accurate data and make informed decisions regarding the same.

Sales and operations planning process

S&OP processes are usually conducted monthly to make the whole supply chain process decisions. The standard planning procedure is listed below.

  • Gathering data: Collecting the current data on inventory, sales, expenses, and cash.
  • Planning market demand: Different ways to create, influence and understand the demand for the product.(Demand sensing and demand shaping)
  • Production planning: Analyzing the constraints regarding production and distribution. Planning the entire production process.
  • Agreement of demand and company objectives: Ensure that the production process and the product’s demand agree with finance and company objectives.
  • Final decision: The plan is then sent to the executives by the S&OP team to review and approval.

Challenges of sales and operations planning (S&OP)

Though considered a boon, sales and operations planning (S&OP) also comes with a few challenges.

  • Executing S&OP comes with challenges too. The manager or the executive who organizes the meeting should identify why there is a necessity for a supply chain planning team.
  • Secondly, it is challenging to involve executives or members from other departments.
  • Acquiring data from different departments like distribution, manufacturing, marketing and sales, and financials is a complex task. Sometimes data or reports will be delayed. But if there is a user-friendly centralized database, it will be easy for the S&OP executive to gather data.
  • One person has to be the head or in charge of the entire decision-making process to avoid miscommunication between the team members.

<<<Also read: 10 Interesting Questions Related to Supply Chain Management>>>

Benefits of sales and operations planning(S&OP)

Sales and operations planning (S&OP) is a constituent part of a company. This team is responsible for the supply chain process and analyzing the demand for the product in the market. Learn more about the benefits of S&OP.

Better and improved inventory management

Inventory management is a critical part of a business. It can thrive or shut down a business. Suppose your inventory dries out, you will not be able to meet market demands. If you have an overflowing inventory, your business will undergo a dangerous zone.

But all thanks to the S&OP team for analyzing and getting insights regarding the demand for the product and executing proper plans benefiting the business to thrive.

Remove departmental silos

In the S&OP process, all the departmental silos have to be eliminated. Collaborate and garner data from a common database. It increases input, increased profitability and improved productivity. All the company’s departments must unite to collaborate and deliver a structured plan to avoid confusion.

Higher product quality

S&OP planning help in analyzing the demand for the product. The team analyses the product to determine if it qualifies to meet the customer expectations or if it is safe for the consumers to use and then approves it for mass production. So, the company can manufacture high-quality products with insights and analysis drawn from the team.

Better Customer Service

Happy customers are responsible for the brand’s good reputation. If the product’s quality is excellent and the customer receives it on time, it’s good for your brand. This results in getting long-term customers for your brand. You can avoid customer churn.

Sales and operations planning (S&OP) is the solution to retain customers and for advocacy.

Sometimes the long-term happy customers can be turned into brand advocates, which is beneficial for marketing the company products.

Increased profits

Your business can achieve higher profits if you break department silos, predict inventory levels, improve product quality and give the best service to the customers. This can be achieved with good S&OP planning. A well-tailored, insightful plan will ensure a smooth workflow, resulting in good productivity and higher profits.

Value of sales and operations planning (S&OP)

Sales and operations planning has much value for any company. The vital part of achieving the desired goal is collaborating, drawing insights, and developing a solution that will benefit the company.

S&OP software assists in giving accurate data to make planned and informed decisions. As the main reason for this meeting is to understand the demand and supply, the automated software can help curate precise data required to find the solution for the supply chain process.

<<<Also read: What is Supply Chain Management (SCM) in ERP?>>>

S&OP(sales and operations planning) Software

Note that sales and operations planning is a process and cannot be automated completely. But it deals with organizing the supply chain process. There is software that assists in conducting valuable S&OP meetings backed by accurate data.

The complexity is that all the data available are stored in the department silos. Only the departments will be able to access it. If there is software like ERP software with a centralized database, all the users and executives will be able to access it.

All the reports presented in the meeting should be accurate and devoid of human errors. Accurate data insights can be drawn if the company has deployed Enterprise resource planning for manufacturing industry software or MRP(Materials requirements planning) software. These two software deliver valuable insights to back each executive decision.

Points to consider when evaluating S&OP software

Implement S&OP software which fits into your business processes. Check if you can draw insights to comprehend the supply and demand scenario.

Choose S&OP software that embraces your business processes with ease. Longer implementation time is a risk to the entire business. Deploy software that adapts to your business processes in at least 10-12 weeks. Longer deployment time sometimes makes the software outdated. S&OP software should possess all the features to adapt to changing business conditions or opportunities.

Wrapping up sales and operations planning (S&OP) has more significant benefits. Implementing this process in your company has much value – understand where your company needs improvement and make changes. Backed with data, executives can make better decisions to increase productivity and profits.

s&op

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