It’s almost impossible to find a definition for sales and operations planning that makes sense, but I’ve put some thought to it and come up with what I feel best defines it.
Sales and operations planning (S&OP) is a high level process that validates:
- Capacity – identifying bottlenecks in your operation as well as your vendors (existing vendors to support the plan)
- Forecast – ensures that your customers can support the sales forecast presented by the executives
- Internal and external
- Financial – ensuring that finance can support the plan put forth as it applies to requirements identified by S&OP
- Human – can my existing resources support the plan
- Equipment – can my existing equipment support the plan
- Vendors – new vendors to support the plan
- Margin/pricing/profitability protection and forecasting
- Internal and external
Sales and operations planning is not:
- A detailed forecast
- Not MRP
- Not CRP
S&OP is none of the above - that level of detail is only required once the plan is approved by the CEO. Sales and operations planning will provide the visibility into the required environment to support the plan, make changes to the situation or the plan and move forward with full support from all departments based on positive input from all areas affected in order to approve and support/execute on the plan.
S&OP uses planning bills for families of products, and derives a constraint capacity report if you attach routings that contain constrained: machines, work centers, outsourced operations, and human resources. Note that this is not a detailed routing - this routing is a simplified routing that only contains the constraints.
When you run this MRP and CRP as a separate run – or in other words, this should not be run with your regular operational runs – you will see next year’s high level plan with all the material, vendor, human resources and equipment constraints. You will also see information you can use to negotiate costs and quantities with vendors, pricing/trade agreements with customers, storage requirements, machine/work center requirements, outside process requirements, capacity and so much more.
S&OP is a visionary tool that is used to validate a long term plan at a high level. It allows you to validate and get buy in from all who have “skin in this game” internal and external. Sales and operations planning is not a forecast and is not at the detailed level. However, forecasts are derived from the S&OP process once the plan is agreed to. Both the forecast and the S&OP require necessary actions from the team. At the S&OP level, you will be working towards a vision and qualifying a plan. At the forecast level you will be executing and implementing an approved plan.
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