Sales and Operations Planning

Sales and Operations Planning:

·         Brings all sales, marketing, development, manufacturing, sourcing, and financial plans together into one set of plans.

·         Held at least once every month

·         Reviewed at an aggregate (product family) level

·         Statement of company’s plans for the near to intermediate future

·         Balances supply and demand

·         Focuses on Product Volume

·         Information in both financial numbers and product units



What is Sales and Operations Planning Process and its relationship within Master Planning of Resources?

·         S&OP relies on demand info from forecasting and demand management functions

·         Determines supply available based on capacity to meet the demand

·         Produces a Production Plan

·         The Production Plan then drives the Master Scheduling Process


Volume Mix in S&OP process

Product Volume

Product Mix

 Bird’s Eye View


How much to produce?

Which Products to produce?

Selling and Production Rates

Customer Orders

Product Families

Individual Products

Sales and Operation Planning

Master Scheduling



S&OP Process Steps

1.       Run Sales Forecast Reports

a.       Update last month’s data:  inventory, actual sales, production, etc…

b.      Gather information for marketing and sales:  forecast reports, sales analysis data, revised worksheets for field salespeople

c.       Share information to appropriate people

2.       Demand Planning Phase

a.       Information from step one reviewed by marketing/sales

b.      Update current forecast or create new one

c.       Forecast includes:

·   product families

·   product life-cycle phase changes

3.       Supply Planning Phase

a.       Operations review step 2 information

b.      Review existing operations, which ones need to be changed based on new info?

c.       If Changes:  Validate revised operations plans against available resources… using resource planning

4.       Pre-Sales and Operations Plan Meeting

a.       Objectives:

·   Make decisions that will balance supply and demand

·   Resolve differences/problems; single set of recommendations brought to executive S&OP meeting

·   Identify areas of no agreement, propose alternative plans

·   Create scenarios of alternative plans

b.      Key Players:  Decision-Makers from …

·   Sales

·   Marketing

·   Product Development

·   Finance

·   Operations

·   The Product Manager

c.       Family-By-Family review of demand and supply plans

d.      Check constraints

e.      Establish priorities

f.        Focus on actual, not planned demand/supply

g.       Review inventory backlog plans

h.      Output:

·   Updated financial plan

·   Recommended action by product family

·   New production introduction plans

·   Recommendations for changes in resources

·   Alternative scenarios for areas not agreed on plus analysis

·   Recommended changes to demand and supply strategies

·   Agenda for the executive S&OP meeting

5.       Executive S&OP Meeting

a.       Objectives

·   Make decisions on each product family, accept recommendations, or determine alternative action

·   Authorize procurement and production changes

·   Compare production plan to business plan, make adjustments if needed

·   Make decisions for non-agreed-on areas

·   Review indicators where performance < planned

b.      Output

·   Meeting minutes

·   Decisions mad Summary

·   Action plan with due dates and responsibilities

·   Authorized game plan

·   Production plan for each product family


Outputs from S&OP:

·         Production Plan:  manufactured product families

·         Purchase Plan:  purchased production families

·         Inventory Plan:  make-to-stock product families

·         Backlog Plan:   make-to-order production families




Difference between Sales and Operations Planning and Production Plan

·         S&OP is the process in which the production plan is created. 

·         The production plan is an output of the S&OP process.


Participant/Decision-makers in S&OP Process

·         Engineering:  Product development/product changes

·         Human Resources:  Workforce availability

·         Operations:  Production Constraints

·         General Manager:  Business Plan

·         Materials:  Supplier Constraints

·         Finance:  Capital and Financing Information

·         Marketing:  Product Demand

·         Sales:  Customer Interface/Concerns


Inputs and Outputs of S&OP

·         Inputs

o   Statement of projected Demand – Marketing

o   Market Intelligence – Marketing

o   Actual Sales and booked orders – Sales

o   Management Targets – Management

o   Indication of capabilities and capacities – Manufacturing or Purchasing

o   Estimate of Financial resources required – Finance

o   New Product information – Product Development, Engineering

o   New Process information – Process Development, Engineering

o   Workforce availability – Human Resources

·         Outputs

o   Sales plan – Marketing and Sales

o   Production Plan – Manufacturing

o   Inventory Plan – Materials Management

o   Backlog Plan – Customer Service

o   Financial Plan – Finance

o   Product and Process Development Plan – Engineering

o   Workforce Plan – Human Resources


Production Strategies in S&OP

1.       Level

a.       As evenly spread over time as possible

b.      Finished goods inventories buffer for demand variation

2.       Chase

a.       Stable inventory level while varying production to meet demand

b.      Produce only what you sell

c.       Just in Time (JIT)

d.      No Sales = No production

3.       Combination/Hybrid

a.       Combination between Level and chase

b.      Example:  Ice cream producer; 1 shift per day in slow season, 2 shifts during busy season


Backlog vs. Backorder

·         Backlog

o   All customer orders received but not shipped yet (open orders)

o   Includes backorders

·         Backorder

o   Unfulfilled customer order or commitment

o   Inventory or capacity was insufficient to meet demand

o   Does not include all back log


Backlog Target Levels

·         Maximum/minimum backlog

·         Planned order times

·         Maximum customer waiting time



What is a Resource?

·         Anything that adds value to a product or service in its creation, production, or service.

·         A constraint could be skilled engineers to design a product, not just labor or machine hours.


Resource Planning

·         The way in which the production plan is evaluated for feasibility

·         Long range capacity

·         Requires top management approval

·         Based on production plan


Steps in Resource Planning Process

1.       Determine bills of potential constraining resources (bottlenecks, short RM supply, lead times…)

2.       Determine unit of measure

3.       Determine planned capacity

4.       Calculate load on each resources (load comes from production plan)

5.       Compare load to planned capacity

6.       Revise production plan or adjust capacity where necessary


Planned changes in resources

·         Facility Startup/Shutdown

·         Adding/removing tooling and equipment maintenance

·         Acquisitions

·         Hiring, layoff, shift changes

·         Education and training

·         Facility issues handled by maintenance

·         Outsourcing/subcontracting

One Comment (+add yours?)

  1. Mihir Sharma
    Jan 22, 2016 @ 17:18:31

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