What is Sales and operations Planning?
APICS (American Production and Inventory Control Society) defines Sales and Operations Planning (S&OP) as the "function of setting the overall level of manufacturing output (production plan) and other activities to best satisfy the current planned levels of sales (sales plan and/or forecasts), while meeting general business objectives of profitability, productivity, competitive customer lead times, etc., as expressed in the overall business plan. One of its primary purposes is to establish production rates that will achieve management’s objective of maintaining, raising, or lowering inventories or backlogs, while usually attempting to keep the workforce relatively stable. It must extend through a planning horizon sufficient to plan the labour, equipment, facilities, material, and finances required to accomplish the production plan. As this plan affects many company functions, it is normally prepared with information from marketing, manufacturing, engineering, finance, materials, etc."
The above definition implies:
- The company has a business plan
- The company has a way of knowing / estimating planned levels of sales or future customer demands
- The company has clear polices regarding inventory (make-to-stock business) or customer order backlog (make-to-order business), workforce stability and more
- The company has a clear objectives regarding profitability, productivity, competitive customer lead times and more
- Company has a planning process / system which will take future customer demands as the primary input along with other required information to work out supply plans (production and purchasing)
So Sales and Operations Planning can then be defined as a business process which tries to ensure that the:
- Company’s demand plans (based on sales forecasts and / or current and future customer orders) are synchronised with its supply plans (production and procurement plans)
- They are based on established management polices and \
- They are capable of achieving company’s certain business objectives
The wholesales, distribution and retail businesses can also use the Sales and Operations Planning Process; the only major difference will be that their supply plans will not include production plans and associated considerations such as labour and equipment capacities. |
