Operations Management / Supply Chain Management

Module 11: Aggregate Planning / Sales and Operations Planning

Sales & Operations Planning is a key process for a high percentage of companies.  However, it is also a process that can be ineffective if done poorly.  The intent of this Module is to present an overview of the process steps, major benefits and some examples of key steps that must be institutionalized and deployed on a regular basis if the process is to succeed.

Let’s highlights some key elements of Sales and Operations Planning.  First, it is top management led.  Second, it provides tactical plans and regular monitoring to ensure that strategic / business plans are met.   All key functions of the business are engaged in the process.  The resultant S&OP initiatives go far beyond just manufacturing and sales.  Sales & Operations Planning represent the way business leaders manage their business – not just a monthly management staff meeting and reporting tool.  In general, Sales& Operations Planning is:

  • Performed at least once a month
  • Reviewed by Management at an aggregate (product family) level
  • Reconciles all supply, demand and new-product plans at both detail and aggregate levels
  • Completely aligns to the Business Plan

The outputs of Sales & Operations Planning represent the definitive statement of the company’s plans for near to intermediate term.  They must cover a horizon sufficient to plan for resources and to support the annual business planning process.  This means that planning approaches and planning time horizons will vary by industry / market segments.

When executed properly, the Sales and Operations Planning process links the strategic plans for the business with its execution and reviews performance measures for continuous improvement.

Supply Chain Management’s key objective is often thought of as balancing supply and demand.  However, in Sales & Operations Planning the role of Supply Chain Management is expanded to reflect the more important role of balancing the needs of the customer with the requirements of the business.

To relate this concept to a true story – A Business Unit President opened the first S&OP meeting in the following manner.  He looked around the table with seats filled by his Functional Vice Presidents and some other key staff.  He asked the question, “How many people work in this division?”  Someone answered “around 100.”   He then said, “I want you to realize that the livelihoods of more than 100 families depends on us doing our job correctly!”

Now, this story is about a small US business unit of a multi-billion dollar, multi-national company.

Imagine if it had been about he CEO of the global company, making the same statement.  In this case there would be thousands of families dependent of the outcome of a global S&OP process.

Sales & Operations Planning is essential to any company.  The purpose of this Module is to help you understand the concepts and be able to apply them to real life situations in your current company or one where you will work in the future.