Sales & Operations (S&OP)

A comprehensive demand planning strategy involves attempting to capture as many inputs as possible and creating a holistic plan that gives us the highest probability of accomplishing company sales goals while managing risk. Typically capturing these inputs will be done through Sales & Operations (S&OP).

Here are the typical steps I like to follow in an S&OP process:

1. Product Review

   1. What is the health of existing products?

   2. What new products are being released? How will these new products affect the sales of current products?

   3. Are any existing products being discontinued?

      1. Important so operations does not continue to order discontinued products.

   4. Will we be making any price changes?

2. Marketing Review

   1. What are our marketing plans? Spend, new campaigns, etc.

   2. Do we foresee the acquisition of many and/or large customers (typically wholesale accounts)?

3. Sales Forecast Review

   1. Are we changing our sales channel strategy? Will we be launching new sales channels (marketplaces, wholesale, retail)?

   2. What is our sales forecast?

      1. Broken down by channel

      2. Located in a visible place and updated regularly - I like using a shared Google Sheet.

      3. Tell everyone involved when forecasts change

4. Supply Review

   1. How will we manufacture the needed inventory?

   2. What risks are there to production?

   3. What materials do we need?

   4. What suppliers will we use?

5. Finance Review

   1. How much inventory do we need to reach financial goals?

   2. Are we financially able to fund the needed purchase orders?

   3. Aside from cash flow, what other capital do we have access to?

Those responsible for decision making in these five areas should be present in a regularly occurring S&OP meeting (usually monthly) to give answers to the listed questions. All contribute to forming company S&OP strategy. Missing any of the steps above can cause big problems for a company. If marketing plans a new campaign that causes stock outages because operations didn’t order enough then the company loses out on sales. If finance does not approve large purchase orders then the company bank account can suddenly enter dangerous territory. If the product team reduces prices, thus accelerating sales without operations having known in advance, stock outages will occur.

At SCG we will create an S&OP process tailored to your company needs. We will then lead the regularly occurring S&OP meetings to ensure all parties within the company are aligned to company goals. This S&OP process will inform the demand planning, financial modeling, and supply chain management we are doing for your company.

If you want to learn more about S&OP, here is a fantastic article by Steven Bowen from Forbes.