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Sales & Operations Planning (S&OP) is needed to align all stakeholders on the way to go with the company. It is a management process to focus, align and synchronize all functions of the organisation, General Management, Sales, Supply Chain, Operations, Product Development, Finance and Human Resources. Typically, S&OP will be executed by running a process that is set up around 4 different meetings where performance, future plans and action plans will be discussed and decided upon: New Product Development meeting, Demand meeting, Operations meeting and S&OP meeting.
Overall the process helps us to cope with different business pains and allows to
- getting aligned on same view of the demand
- get a better view on future capacity needs and availabilities
- get a better grip on inventories
allowing to increase customer service, improve efficiency and improve inventories.
For many businesses the view on future demand is limited to a restricted view for a short time period that will not allow to plan the company resources correctly. Building a common understanding of the future demand and align all stakeholders on the same view of the demand is key to build correct plans and avoid all internal frictions on different views and interpretations of the same reality. Aligning this view with the customers is even better and will improve drastically customer experience and customer service.
Building this demand view also encompasses the view the stakeholders may have on New Product Development and Product Life Cycle Management. In many situations a good view and common understanding on the real priorities and expectations can be built on Phase In and Phase Out items by bringing the information to the NPD Meeting.
Using validated demand on a longer horizon allows to get a better view on future capacity needs for resources and equipment. It will help to identify future situations of overload and overcapacity and define upfront action plans to cope with the issues. Typically, this avoids to do constant short-term firefighting, jumping from one issue to the next one without really solving the issues structurally. On top a well-managed operations plan brings a lot of serenity at all levels of the organisation.
The real value and performance gains of S&OP come from collaboration between the different stakeholders. All parties are able to align because they use the same view of the reality and the data behind. Through performance measurement, a holistic review of the situation and action plans, S&OP brings an end to excuses and drives accountability. The results are often impressive.