The Merits of Sales and Operations Planning

by | Jun 21, 2012 | Business

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Sales & Operations Planning (S&OP) is an important IT investment for any business. S&OP is basically the coming together of the sales, operations and finance divisions of a business or organization to optimize plan production, financial targeting and fulfillment. S&OP is an important component of supply chain management.

This integrated business management process was first developed by Oliver Wight in the 80s. One of the greatest benefits of S&OP is that it helps with the introduction of new products. The process of launching a new product is usually very time consuming, but sales and operations planning can ensure that this time is reduced and that there is minimum disruption to the market for existing products. S&OP also facilitates exit strategy development for items that you wish to discontinue. You will be able to adjust the timing of introducing new products to eliminate or minimize carryover of obsolete inventory as you coordinate launch/exit programs.

S&OP helps organizations make decision on future rates of demand and supply, to integrate financial plans with operational plans and at aggregate levels, to generate high-quality forecasts. Note that sales and operations planning, is a business process and not a software program. This means you will not spend much on S&OP.

Yet another advantage of S&OP is that it helps with customer service. S&OP is collaborative in nature, meaning it will improve the service levels of your employees while reducing inventory investment concurrently. Greater customer service levels will lead to increased sales since you will get return customers, referrals and great reviews. Sales and operations planning helps you reduce the overall inventory investment with increase in service level. This is because you will be using business intelligence from different functional areas and with greater demand forecast. You will be able to identify potential trouble spots early enough and you will be able to avoid inappropriate production and procurement decisions.

With proper S&OP, there will be a balance between supply and demand. This leads to customer order backlog reduction and improved customer satisfaction. Productivity rates will stabilize with time since demand and supply will be balanced. This means greater productivity and greater system predictability confidence. The reduction of uncertainties in the supply chain means reduction in procurement and production lead times.

S&OP means you will be able to make better decisions in less time in a team. It will open up cross-functional communication channels, meaning all team members will be able to enjoy greater accountability and control. An organization benefits from sales and operations planning since it is able to spend time in the actual production and less time on planning. There are many tools that offer automation in the planning. You could also enlist the services of an optimum solutions company to come up with the best plans.

Enhance your supply chain management strategy by doing sales and operations planning. This helps you with customer service and inventory management and in reducing operational costs, among other benefits.

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