Best Practices for Implementing Sales and Operations Planning

  • by Rajesh Ray, Senior Managing Consultant and SCM Product Lead, IBM Global Business Services
  • March 29, 2013
The sales and operations planning (S&OP) process can bring about substantial improvements in the way a company manages its supply chain. Learn the building blocks of the S&OP process, what it needs in terms of technology, and how this is supported in different SAP solutions.
Key Concept
Sales and operations planning (S&OP) is the process of linking a company’s supply and demand plans to the marketing, sales, and financial plans so that one plan drives a company’s supply chain for the near to intermediate term. Without this process linkage the operations, sales, and finance teams work independently and create separate plans for their respective areas. If every department creates its own plan, then there is no consensus on one number, which may lead to high inventory or stock out or less capacity utilization of resources. SAP offers different solutions that vary in terms of capability and sophistication to meet the requirements of this process.

The objective of the S&OP process is to support target customer service levels while optimizing total costs through balancing product supply and demand. Common S&OP objectives include:

  • Minimize costs/maximize profits
  • Maximize customer service
  • Minimize inventory investment
  • Minimize changes in production rates
  • Minimize changes in workforce levels
  • Maximize use of plants and equipment

S&OP in the Overall Enterprise Planning Hierarchy

Table 1 shows where S&OP fits in with other enterprise planning processes in terms of product scope, planning horizon, and the types of decisions involved.

Table 1
Enterprise planning processes compared

Rajesh Ray

Rajesh Ray currently leads the SAP SCM product area at IBM Global Business Services. He has worked with SAP SE and SAP India prior to joining IBM. He is the author of two books on ERP and retail supply chain published by McGraw-Hill, and has contributed more than 52 articles in 16 international journals. Rajesh is a frequent speaker at different SCM forums and is an honorary member of the CII Logistics Council, APICS India chapter and the SCOR Society. 

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