Balancing supply and demand made easy with the S&OP process

A company's success is the result of a perfect alchemy between the value proposition of its offering, consumer expectations, sound financial management and the efficiency of its sales/marketing departments.

The good news is that it's possible to achieve this synergy and (finally!) break down silos thanks to a salutary approach: the S&OP process.

Sales and Operations Planning, by aligning demand, supply and resources, optimizes the performance of organizations, while ensuring their profitability. Sounds pretty interesting, doesn't it?

But you still need to understand the ins and outs of this procedure, and know how to deploy it intelligently.

Here's how 😉

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What is sales and operations planning (S&OP)?

The S&OP process: definition

Sales and Operations Planning( S&OP ) defines an integrated decision-making process, generally carried out on a monthly basis. It involves anticipating customer needs, in order to better manage your supply chain and resources, while keeping your finances under control.

In short, it's about balancing supply and demand.

S&OP is based on several stages:

• product review ;
• demand forecasting ;
• supply planning ;
• plan reconciliation;
• validation by management.

👉 We'll come back to these different stages in detail later in the article.

Who are the S&OP players?

Given its holistic approach, the S&OP process naturally involves many departments within the company.

To summarize

• sales and marketing forecast sales, based in particular on trend analysis ;
• supply chain and operations adjust production and inventories;
• finance controls profitability;
• General Management makes decisions and sets the company's strategic direction.

How important is the S&OP process? The 5 key benefits

• ✅ Improve decision-making. The primary objective of Sales and Operations Planning? To provide an overview of operations, through, among other things, the implementation of various scenarios. This enables the company to develop truly relevant action plans.
  
  
• ✅ Seize business opportunities. The S&OP process enables you to take account of market behavior in real time. As a result, you can respond nimbly to consumer demand, without letting your competitors steal your thunder.
  
  
• ✅ Mitigate risk. With its proactive approach, S&OP helps identify problems before they affect the supply chain. As a result, you reduce the risk of interruptions and improve the company's resilience in the face of market uncertainties. What's more, satisfying customer demand in all circumstances also makes you a player they can count on!
  
  
• ✅ Achieve profitability. Your objective: to respond diligently to demand... without losing money (overstocking, wastage, etc.)! Sales and Operations Planning helps you achieve this balance.
  
  
• ✅ Collaborate more. S&OP is one of those processes that involves breaking down silos. By fostering close collaboration between different departments, it creates synergy between employees, who are then more willing to work together to achieve the company's common goals.

The S&OP process: an example of the steps to follow to ensure it runs smoothly

Step 1: Product review

This first step involves an in-depth analysis of your product portfolio, to ensure that it remains in line with consumer needs.

To do this, the product team, and sometimes R&D too, examine market behavior.

• How is your product offering currently performing?
• Are certain products reaching the end of their life cycle?
• Should you plan to introduce new items, or discontinue others?

☝️ This phase is an opportunity to boost your capacity for innovation, always in line with your strategic needs.

Step 2: Demand planning

The next step is to collect a lot of data.

However, it's important to adopt a top-down and bottom-up approach, with a global forecasting logic.

In other words :

• base your forecasts on data available in the field, in particular from sales and marketing departments (past sales, future forecasts based on planned actions, etc.) ;
• as well as internal and external analyses of market behavior, and statistical models.

☝️ This operation must be carried out at the level of the entire offer, as well as at the product level.

Step 3: Supply planning

Now that you have a clear picture of demand, it's time to plan supply.

More concretely, this phase involves assessing whether the production capacities and resources available within the company can meet the forecast demand.

However, it is important to take account of external constraints, which are sometimes more difficult to anticipate (shortages of raw materials, problems with suppliers, etc.).

Step 4: Reconcile plans

At this stage, consolidate demand and supply plans, so as to identify any discrepancies and the resulting adjustments required.

The finance department plays a key role here:

• it ensures that operational plans remain in line with the organization's financial objectives ;
• it assesses the implications of potential deviations on revenues, costs and profitability.

Step 5: the executive committee

The S&OP Executive Committee is the final phase of the process. At this stage, management reviews and approves (or not) the consolidated plans.

This final "check" ensures that the planned strategies are in line with the company's overall objectives, and that resources are properly allocated.

S&OP process tools

While S&OP has long been applied within companies, the process has taken a new turn in recent years: that of artificial intelligence and machine learning.

Indeed, where managers previously operated via static spreadsheets, they now use tools capable of:

• simulate various scenarios;
• integrate large quantities of data, in real time (from various departments, but also relating to the market).

☝️ This last point underlines the importance of using tools that integrate with your other systems, notably your ERP and CRM, to ensure the smooth flow and reliability of information.

🛠️ Software example :

Ganacos' flexible S&OP solution, designed for medium-sized and large companies, helps you to manage your Sales and Operations Planning in a collaborative and agile way. Connected to all your data, this software enables you to draw up reliable forecasts, in favor of a better balance between supply and demand. Develop several scenarios and anticipate variations in your business.

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5 best practices to optimize your S&OP process

#1 Organize the process efficiently

The S&OP process must involve all the company's players if you wish to obtain a global vision of operations. But also the various stakeholders upstream (suppliers, for example) and downstream (end customers).

💡 However, given the various functions involved, it's a good idea to designate a single collaborator in charge of leading meetings and coordinating actions.

#2 Rely on reliable data

Working on the basis of accurate and exhaustive data is, in a way, the sine qua non for the success of the process. That's why you need to use a tool capable of compiling and making reliable all this data.

Rely also on the indicators that are most relevant to S&OP issues. For example

• OTIF (ability to deliver orders on time and in full) ;
• Customer Service Level (does the company meet customer expectations in terms of product availability and delivery times?

#3 Communicate effectively

Good communication is another key to success.

So organize regular meetings and use tools that simplify exchanges and collaboration between the various departments involved.

Remember, the S&OP process goes hand in hand with a holistic vision of procedures!

#4 Make information easy to understand

We recommend the use of dynamic visual aids during meetings. This will make it much easier for those involved to lead discussions, compare different scenarios and visualize operations.

Understanding information is the first step towards informed decision-making. 💡

#5 Adapt the process continuously

The S&OP process needs to be flexible to respond to the various changes likely to impact it, whether internal developments or market fluctuations.

By regularly reassessing forecasts and capacities, you can quickly identify deviations and adjust plans in real time.

See all software Supply Chain Management

The S&OP process in a nutshell

As the market becomes more complex, new challenges await companies. Aligning supply and demand, without losing money, is one of these challenges.

This is what we call the S&OP process. Thanks to the S&OP process, the silos that compromise collective intelligence are a thing of the past: sales, marketing, management, supply chain and operations work hand in hand, to develop the most relevant plans in the light of their constraints.

But this can be a complex task, especially for large organizations. Fortunately, there is software to support you. Often augmented by AI, they collect the (many!) data required for analysis, anticipate all situations and suggest the subsequent course of action.

The result is finely-tuned production planning, ensuring that you make the difference with your customers... without losing any feathers!