What Sales and Operations Planning (S&OP) Is and How It Can Benefit Your Business
Integrating sales and operations planning (S&OP) into an enterprise-wide process creates a robust picture for executive decision-making. It ties together demand, supply, and financial planning as part of a company’s master planning. Sales and operations planning is essential to the supply chain because it creates a view for future operations and holds people accountable for data that impacts your bottom line.
Beginning with projected demand, S&OP looks at available resources and operational performance to understand the landscape when making financial decisions. The process involves strategic and tactical plans.
S&OP works in unison with procurement teams to streamline business functions. Procurement management helps with supplier relations and engagement, manages compliance, addresses and solves customer demands, drives profit, and reduces supply chain risk. It also ensures warehouses are well-stocked with the proper supplies at all times. When S&OP and procurement teams work well together, you can reduce costs for the customer without compromising quality and product failures.
Below, we’ll highlight why efficient S&OP is vital for businesses, why the planning process should be incorporated into supply chain design, and how digital twins offer additional benefits.
Why do businesses need sales and operations planning?
Sales and operations planning is not a one-and-done exercise. It is an ongoing process that incorporates, at a minimum, finance, operations, sales, and marketing. It gives greater visibility into the supply chain and allows you to make decisions before the product is handed over to the customer. Its success depends on the following:
Communication and coordination
The larger the enterprise, the more difficult it becomes to establish effective end-to-end communication and coordination. Changes in demand aren't sent to production. Sales and marketing are not informed when supply chain delays impact delivery. But with a well-designed S&OP tool, any changes can be incorporated into the operations planning process to ensure everyone is working from the same set of facts.
Sales and operations planners often rely on a reporting process that is fractured, rather than unified, potentially resulting in executives having to make decisions on faulty information. This process typically involves myriad spreadsheets, with sales tracking demand on one sheet, and production entering the latest production numbers into a different system. Employees either spend hours trying to harmonize the data, or they use incomplete and inaccurate data.
But with a unified system, where everyone is working with the same data, it creates a more comprehensive, accurate picture and leads to better sales and operations reporting across the board.
Key performance indicators
An executive team may not identify the right key performance indicators (KPIs) if each department in the company creates its own. The best KPIs are those that show how the actions in one area impact the functioning in another. Despite operating in silos for decades, most businesses recognize the need for end-to-end transparency. They just don't know how to get there.
With a comprehensive system, everyone can see the difference between supply and demand. Decision-makers can see that they need to devote more resources to production if they want to maintain a supply that meets customer demands. Without the collaborative nature of an S&OP tool, companies would not see the bottleneck until it was too late to make resource reallocation.
Without a system that converts enterprise-wide data into actionable insights, organizations are forced to make decisions without a clear picture of their impact. It's impossible to develop what-if scenarios with clear outcomes without comprehensive data and forecast accuracy. Without technology, businesses could spend weeks trying to collect and analyze data from across an enterprise.
Technology gives companies the ability to correlate volumes of data and produce a coherent report that can be used to make strategic and tactical decisions. Ad hoc reports are possible to help decision-makers respond to critical changes quickly. Harnessing technology's advances in data processing, machine learning, and analytics means companies have the resources to not only survive but thrive.
How to make S&OP more successful
Planning on an annual — or even quarterly — basis isn’t sustainable anymore. The market realities are changing too fast. And as time goes on, it’s possible that engagement and enthusiasm within the team will dissipate, affecting how valuable and efficient the process is. In order to sustain quality S&OP, it’s important to take measures that maintain its relevance and added-value.
To work towards a robust continuous improvement approach, consider implementing the following:
- Define a clear infrastructure to maintain high levels of engagement. Represent the enterprise stakeholders in S&OP and give them specific roles and accountabilities. This will keep everyone engaged throughout the process.
- Use an internal audit of operations to identify strengths and weaknesses in the company. Be transparent with your findings.
- Frequently share success stories, highlighting specific individuals to drive peer and leader recognition. Bonus points for also sharing failure stories so everyone can learn and a culture of perfectionism doesn’t limit growth and innovation.
How digital twins assist with S&OP
Digital twins are technologies that maintain a virtual copy of an existing system to enable organizations to perform what-if analyses. The twin is updated with the same real-time data as the live system, so any scenario changes are based on actual data. The use of digital twins makes continuous design and improvement possible.
A digital twin optimizes the S&OP process by highlighting risks and opportunities, feeding the insights back into the planning process. As a result, the company can reduce losses from misaligned plans. A few other benefits include:
- Monitor risk. Companies can create what-if scenarios to learn the best course of action. They can interject variables into the model to understand the impact on production, operations, or effective sales and improve organizational stability.
- Improve agility. Digital twins make agility possible. The technology enables organizations to visualize how to modify operations to better address changes in supply chains or market demands.
- Optimize operations. Virtual models can optimize operations through sales forecasts that can eliminate disruptions in supply chain deliverables.
- Predict performance. Looking at the appropriate KPIs and key metrics can help businesses evaluate end-to-end performance to ensure consistent operations.
Coupa’s solutions can help with S&OP planning
Through ongoing virtual modeling, companies can update entire supply chain designs to continuously reflect the operational environment. If you're interested in seeing how Coupa's continuous design platform can help your business transform its operations planning process, contact us today.