The Principles of Sales and Operations Planning (S&OP)

What is Sales and Operation Planning?

Sales and Operations Planning (also referred to as S&OP) is a business’s operational planning process for reconciling financial, sales and production plannings. It was developed by Andy Coldrick in 1987 to help with the successful use of MRP systems.

Today, S&OP is an important part of the processes within many organizations for managing the balance and trade-off between the conflicting preferences of supply and demand. This process is usually conducted on a monthly basis, where data is collected on previous sales, future forecasts, current inventory and production plans—in terms of both value and volume.

The data is then aggregated and analyzed, and risks and constraints are identified. Each month, a meeting is then organized to review the reconciliation and feasibility of those plans, with key persons participating from finance, supply chain, marketing and sales departments.

These monthly meetings increase communication between the different functions, enabling everyone to share the same objectives and vision of the business.

Why is Sales and Operation Planning essential?

S&OP ultimately helps companies improve customer fill rate, reduce inventory levels and obsolescence. It has been proven to greatly boost the bottom line of companies who successfully implement such processes.

The key difficulty is in implementing such a process the right way. It is critically important to have all the necessary departments represented at the planning sessions along with senior management figures. Meeting preparations should not only be conducted by supply chain figures, but also marketing and finance leaders.

The success of such planning requires the establishment of a proper internal culture and team training.

How can Zensimu help with Sales and Operation Planning training?

Including Zensimu’s Beer Game in establishing the culture and training sessions to execute successful Sales and Operational Planning is highly useful. The game’s simulations reveal what can go wrong when plans are misaligned.

It’s often observed that marketing and sales teams work in silos, promotions are inaccurately and not promptly communicated to the rest of the supply chain, etc. The Beer Game is also an effective tool for demonstrating the importance of having reliable and up-to-date forecasts.

S&OP processes are more effective when including clients and suppliers, requiring information sharing and promoting a collaborative mindset. The Beer Game provides convivial and enriching simulations and gameplay experiences that are ideal for setting the stage for creating this cooperative culture. All players share the same language, better understand certain risks and learn about S&OP planning in a fun way.

To learn more about how companies integrate a serious game into their training programs, check out how Bose used the Beer Game to engage employees around S&OP and prepared its sales and marketing teams for a large initiative to improve forecasting at the link below.