According to Tom Wallace, one of the leading people behind the important initial development of S&OP, “Sales & Operation Planning (S&OP) is a set of decision-making processes to balance demand and supply, to integrate financial planning and operational planning, and to provide a forum for establishing and linking high level strategic plans with day-to-day operations” (Wallace, nd).
The highlights of an S&OP process are as follows:
The sales and operations planning process contains the following steps:
S&OP is important for many businesses, but why?
Nowadays, S&OP has made it into the top-level agenda of most leading firms around the planet, even though many companies still struggle to get it right. On the one hand this might be surprising since the process steps are really not that complicated. The complexity is that you try to align several departments, who are not used to speak each other’s language.
While implementing S&OP, you should be aware of the following pitfalls:
Because S&OP is simple but not easy, a real life learning experience creates enormous value. The participants will feel and recognize the important issues in this process. In Inchainge’s business simulation The Fresh Connection, the S&OP process is managed with the complete management team. By choice we can create a context of constrained or unconstrained capacity.
In The Cool Connection we take this experience even a step further. By adding a financial manager and constraints a new dimension is added. In this simulation the team is forced to make yearly financial budgets and quarterly forecasts. The best performing teams are both profitable and predictable at the same time. In this simulation the team is experiencing a real IBP process.