What is Sales and Operations Planning? [S&OP Guide]

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Sales and Operations Planning enables businesses to make the right decisions about where they spend their money, what products they sell, and how often to replenish stock. It’s the process that aligns the thinking of each department within a company and enables productive collaboration on key projects.

What is Sales and Operations Planning?

Sales and Operations Planning (S&OP) is the process of aligning demand planning with supply planning and financial planning to create an integrated business strategy. It helps key decision-makers determine which systems must be put in place and which actions must be taken to ensure a business achieves its supply chain targets.

sales and operations planning meeting

Benefits of Sales and Operations Planning

The primary benefit of S&OP is that it enables a business to connect the dots across multiple workstreams and business areas. That means fewer wires being crossed and more happy collaborations.

Other benefits of Sales and Operations Planning include:

  • Happier customers: A high-functioning S&OP team supports better decision-making at the executive level. In turn, that means the business is ahead of the curve with trends and able to deliver on customer expectations.
  • Increased efficiency: The S&OP team’s ability to oversee multiple teams means it can recognise optimisation opportunities that would be otherwise missed. This allows a business to tighten up processes and eliminate double handling of tasks.
  • Increased profits: Increased efficiencies lead to greater profits. S&OP can help identify where costs can be reduced, duplicate efforts minimised, and higher-value decisions made.

The role of S&OP in a product business

Sales and Operations Planning is typically managed by an S&OP team. The S&OP team’s role is to connect different business arms and ensure they are strategically aligned. This enables the executives to make significant business decisions.

S&OP aims to establish an integrated plan for the following activities:

S&OP is designed to ensure all the different business teams are working together to maximise efficiency and profitability.

S&OP strategy

An S&OP strategy considers the various push-and-pull factors of the business. In creating this overarching plan, the S&OP team can identify and resolve points of friction, identify changing customer trends and demands, and improve financial efficiencies. This strategy, once approved at the executive level, will feed into a master schedule.

An S&OP team will typically be involved in:

  • Demand planning – analysing historic sales data, customer behaviour, analytics and insights, and industry trends to identify likely future sales.
  • Supply chain management maintaining and improving supplier relationships, negotiating sales agreements, and assessing the quality of goods and delivery reliability from various vendors.
  • Inventory management the systems in play for bringing stock in, managing units in the warehouses, and delivering orders to the customer.
  • Delivery workflows transport methods and the tracking of in-transit inventory.
  • Cross-functional collaboration – how each department within a business works together with other departments to achieve a desired outcome.

Insights from an S&OP strategy will also be used to create a material requirements plan (MRP) and feed into the decision-making around production processes, procurement, and workforce management.

sales and operations planning in the supply chain

Sales and Operations Planning in supply chain management

Sales and Operations Planning plays a critical role in supply chain management because it integrates supply planning with the goals and strategies of other key departments such as sales and finance.

This results in more informed allocating of budget and resources and can help improve interdepartmental collaboration on important projects.

Let’s look at some examples of how Sales and Operations Planning intersects with supply chain management.

Supply chain integration with sales

S&OP will help ensure enough inventory is available to meet the demand for the product going out. This requires balancing budget, labour, and warehousing demands. It also requires collaboration across different teams to centralise the appropriate data, team knowledge, and limitations.

Supplier partnerships and collaboration

The S&OP team is across all supplier relationships and is responsible for identifying key opportunities for collaboration. For example, if one supplier has transportation issues at a certain time, another supplier may be able to pick up the slack – the Sales and Operations Planning team are there to facilitate this effort.

Inventory optimisation

S&OP supports the warehouse management lead by ensuring they have the right information to make smart decisions around inventory control and replenishment. That means keeping them informed about supply issues or concerns, shifts in demand, and optimal reorder levels for specific stock items.

Risk management oversight

S&OP provides oversight on risks that individual departments may be too siloed to identify. For example, there is a stockout risk if a supplier is running low on a product before an expected seasonal uptick in demand. The S&OP team can ensure that anticipation inventory for that item is ordered before it’s too late.

Performance analysis and improvement

Sales and Operations Planning can analyse cross-team performance to identify opportunities for improvement and business gains. These opportunities may not be seen by teams working on specific projects or with task-specific goals.

S&OP strategy

The Sales and Operations Planning process

The Sales and Operations Planning process will differ from business to business depending on business model, industry, budget, and ambitions. However, there are some fundamental steps in the S&OP process that we’ll look at here.

1. Dive into the data

The starting point for any business analysis should be the data. Analysis of historic data reveals important information around metrics like supplier reliability, warehousing efficiency, customer trends, and seasonal shifts.

Make sure you’re using an effective Business Intelligence tool that can capture that data and present it as digestible insights. A cloud-based, integrated software stack will ensure that data is consistent and visible across the entire business.

2. Create forecasts

With the right datasets, accurate forecasts can be made around market shifts and customer behaviours. Historic data matched with current customer behaviours and insights into likely future trends means the team can build accurate forecasts.

This helps the business make predictions around optimal reorder levels, supplier selection, resource allocation, and staffing requirements.

3. Optimise your supply chain

Data insights and forecasting then help businesses create an optimised supply chain that minimises expenses and lead times.

This typically means procuring vendors, determining optimal reorder levels, mitigating supply chain disruptions, and developing an inventory management strategy that reduces waste.

4. Develop a marketing plan

All the work in the previous steps has one goal: selling to the customer.

Marketing your products enables customers to learn about your brand, the problems you solve, and the values your company represents.

An effective marketing plan should determine which marketing channels are best suited for your specific audience, what type of marketing materials will move them further along the sales funnel, and the actions required to execute the marketing strategy effectively.

5. Allocate budget and execute

Once strategies for each department have been planned, the S&OP team identifies opportunities for collaboration and works with the financial planning team to decide where best to allocate resources and budget.

The bird’s-eye-view nature of S&OP gives executives the ability to weigh up various trade-offs that will inevitably come up. They can then give the go-ahead to ensure every strategy is executed in the way that best serves the company’s interests.

6. Monitoring of performance

Once an S&OP strategy has been executed it is the role of the S&OP team to monitor various KPIs and affirm the accuracy of the forecasts.

Oftentimes strategies, once underway, will require tweaks to forecast. A business should be ready to pivot under speed to accommodate changes in demand or unexpected shifts in behaviour.

This agile way of working should be built into a company’s business model from the outset. This way, all unexpected shortfalls are treated as an opportunity to learn and evolve rather than as a failure.

Sales and Operations Planning challenges

S&OP is a mammoth task that involves many moving parts, and it’s not always simple. Let’s look at some of the biggest challenges involved in effective S&OP.

Data accuracy

Analysis can only ever be as good as its datasets – S&OP relies on the accuracy of reports and data from other teams, including information about market trends, customer purchasing patterns, and supplier reliability.

If any of these reports are inaccurate you run the risk of building a strategy that doesn’t work. Your ability to trace the root cause of any issues that arise is also compromised, reducing the likelihood you will come up with the correct solution to resolve them.

Clear communication and effective collaboration

Sales and Operations Planning relies heavily on clear communication and easy collaboration between different teams. But there are often tensions between departments that can hamper the execution of your S&OP strategies. Conflicting objectives, siloed decision-making, or unaligned plans can make the S&OP process more difficult than it needs to be.

Forecasting accuracy

Reliable forecasts that accurately reflect future business needs and customer demand can be difficult to prepare. This is because they require input from different data sources and departments, and a single miscalculation can skew the accuracy of the entire thing.

Unpredictable external factors

Unexpected external factors can also disrupt the strategy devised by an S&OP team. The world’s rapidly changing environment – think climate change, artificial intelligence, population growth – means supply chain disruptions are likely to increasingly happen.

These disruptions may run counter to what was predicted by your forecasts, which highlights the importance of regularly reviewing and updating them.


Sales and Operations Planning best practices

The S&OP team has got a tough job. They’ve got to solve a broad range of challenges, give consideration to each department’s unique requirements, and encourage collaboration across an entire organisation.

To moderate some of these difficult tasks, let’s look at some of the Sales and Operations Planning best practices that can make the S&OP process run smoothly and effectively.

Get buy-in at the executive level

The executive team are the people that ultimately approve or reject an S&OP strategy. Getting their full attention and support is therefore imperative to executing what’s best for the company based on in-depth data and market analysis.

Make sure your C-suite understands exactly how important the role of S&OP is within a business and present your S&OP strategy in a well-thought-out pitch that answers any doubts they may have.

Build collaboration into your company culture

Sales and Operations Planning needs to create a culture in which different business teams and individuals are encouraged and willing to contribute to the bigger picture.

Look for other ways for departments to work together and get to know one another outside of S&OP. This could be as simple as hosting an icebreaker event before executing your next strategy. People that already get along are more likely to work well with each other.

Embrace technology

Modern technology such as cloud software and analytics tools are crucial for efficient Sales and Operations Planning. Consider which programs will better enable you to collaborate on large projects, synchronise information between various channels, and improve datasets.

S&OP software

S&OP software refers to any digital system that helps businesses better create and execute an effective S&OP strategy.

They can include:

Important S&OP software features

Though S&OP software tools can each serve a different function within a business, there are some key attributes to look for when developing your S&OP software stack.

Key S&OP software features include:

  • Multi-user and team usage options. S&OP requires inputs from multiple teams so collaboration should be as easy as possible. Look for software that allows different teams to work together on the same project and easily share key information in real-time.
  • Customisable settings. S&OP software should be customisable to match the specific needs and nuances of your business. If there are critical data verticals your team must track, for example, you’ll need software that can be set up to track them.
  • Third-party integration. The ability to integrate all your disparate software systems is crucial for efficient Sales and Operations Planning. Tools that can connect and share data ensure every team is seeing the most up-to-date and accurate information at any time, preventing misinformed decision-making.
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Oliver Munro - Unleashed Software
Oliver Munro

Article by Oliver Munro in collaboration with our team of specialists. Oliver's background is in inventory management and content marketing. He's visited over 50 countries, lived aboard a circus ship, and once completed a Sudoku in under 3 minutes (allegedly).

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