Have you ever seen the acronym S&OP and wondered what it stood for? S&OP stands for Sales and Operations Planning. It is a popular process that aligns a company’s diverse supply chain functions while balancing supply and demand.
The next question you might be wondering about is, what does S&OP entail?
We’re glad you asked, continue reading to find out…
Prepare Data for Demand Planning
Some of the more important activities of supply chain planning involve – product segmentation, managing customer inventory demand, and location allocations. A Demand Planner can use the SAP Integrated Business Planning (IBP) application to consolidate and correct sales history, which is used for statistical forecasting.
Generate Statistical Forecast
Making use of the advanced statistical models in SAP IBP, a statistical forecast is generated for products that require planning. Reviewing predefined alerts creates awareness of forecast exceptions. Once exceptions are identified, the planner reviews and makes appropriate adjustments to generate the baseline forecast.
Incorporating External Intelligence
A planner does not work in a silo as he or she needs to communicate with other functions such as marketing, sales, finance and the customer. The planner reviews and incorporates information from other groups and comes up with the final unconstrained demand plan.
Generate Consensus Forecast
During the monthly demand review meeting(s) the team aligns with the consensus demand, which is then published for the supply planning team to carry out their planning activities. While generating the consensus forecast, it is important to create a revenue forecast based on the financial input from the unit price forecast, which is represented in terms of dollar value.
The supply planning team reviews the network parameters and ensures data accuracy. Any missing information (production cost rate or resource capacity) is updated before the constrained supply plan is generated.
Generate Constrained Supply Plan
Unconstrained demand plan is allowed to pass through the network constraints already maintained in the IBP application, which generates a time-phased constrained supply plan. Use of the SAP IBP advanced supply planning algorithms is very helpful for this activity. Supply planners will generate alerts to review exceptions (customer demand drop > 15%) and take necessary actions.
The IBP scenario planning functionality allows for multiple “what-if” scenarios to be created for strategic planning. For instance, what would be the impact on supply if the demand plan is increased by 20% for the month of November?
S&OP Team Review of Constrained Plan:
The S&OP team reviews the planned constraints against the annual operating plan to determine if the proposed plan aligns with leadership goals and net financial implications. The contribution margin and profit projections are also reviewed and discussed during S&OP review meetings. Once reviewed, the plan is released to the operations team to execute.
There are several moving parts when it comes to S&OP; having experienced planners helps ensure the overall process runs efficiently and customer demand is fulfilled.