Knowing what the S&OP processes are is essential to any business person. They are the bases of a company’s supply chain and are fundamental to making it efficient and guaranteeing that it works perfectly. However, do you know what these processes are?
- First of all, what is S&OP?
Sales and operations planning is an integrated planning process used in the supply chain to help supply chain executives make the proper decisions on diverse topics, such as examining proposals and investments related to new suppliers, facilitating the introduction of new products or services, balancing demand plans with supply plans, phase-out of old services or products, and more.
S&OP needs inter-departmental communication to work properly. Each department, including finance, procurement, sales and marketing, engineering and operations, data support, and more, must communicate healthily to correct the planning.
Because of it, executives can make better-informed decisions. The S&OP is usually repeated on a monthly basis and helps companies focus the resources on the right services or products so the costumers can receive what they need while the business is still profitable.
- What are the six steps of the S&OP process?
There are six essential steps in the S&OP. They are:
- Product review –
In this phase, the existing products or services are analyzed so they can gather enough information for product planning. This data can help the executives to make decisions concerning resource allocation or project prioritization. For example, if a product isn’t doing well, you can reallocate its resources to other products.
- Demand review –
The demand review checks factors that influence independent and dependent demand, including marketing, consumer trends, new product introduction, interplant part demand, product hierarchy, and more. A combination of product plans, sales, and marketing are the bases of the consensus demand plan.
- Supply review –
This step must create a supply plan that is perfectly synchronized with the consensus demand plan. They usually work in unison, although sometimes there are exceptions. Some alternate supply plans are also created to consider the demand and capacity variations. Remember to consider multiple “what-if” scenarios.
- Finance review –
This step in the S&OP processes order is quite controversial since it depends on the company. Some say it comes after the three first steps are complete, while others say it should always be on. The goal of the finance review is to produce a set of baselines that helps with the rest of the processes. The financial performance for the previous month is consolidated so the current month’s S&OP cycle can be properly analyzed.
- Pre-S&OP –
In this step, multiple meetings with the leaders of several company levels study the result of the review processes. Its purpose is to check key gaps and problems so they can create strategies and plans to deal with these issues.
- Executive S&OP –
Finally, the last step unifies all plans and data in a cloud-based platform that can be used in executive S&OP meetings. All scenarios and risks are reviewed, and important decisions are taken.
To help with this process, several companies use supply chain software, such as the one offered by John Galt Solutions. Check their website to see how they can help with your company’s processes.