Best Practices

Sales and Operations Planning (S&OP) Process Guide

Jonathan Friedman
July 3, 2021
Sales and Operations Planning (S&OP) Process Guide

Curious about the Sales and Operations Planning (S&OP) process? Then, you've come to the right place.

There is nothing more frustrating than unfulfilled sales due to a lack of planning. The only thing that comes close, in frustration levels, is having too much product due to a lack of sales.

Have you ever experienced a mismatch when sales and the supply chain don't communicate?

The S&OP process is the best solution to avoid painful mismatches. This process is cross-functional. It couples critical customer information with the supply chain's key performance indicators (KPIs).

A successful S&OP process means that all teams know where the company stands on all purchasing demands. This article will give you an overview to establish a success-oriented sales and operations planning team. 

Below is everything we will cover. Feel free to skip ahead.

Sales and Operations Planning

Companies see greater rewards when they correct the misalignment between sales and operations. The management with executive oversight drives the necessary balance. The process incorporates operational KPIs and sales funnels.

Ensure accuracy

To ensure product accuracy, the alignment is checked in the following areas:

To determine avatar expectations, the process notates ongoing customer behaviors. In all cases, sales and operations become the checks and balances of each other.

This monthly true-up can feed financial projections within a + and – 5% of accuracy. That measurement thrills owners/shareholders and stakeholders.

This type of stability is crucial to the financial well-being of the company. It also sets an internal benchmark from which to work.


All stakeholders should attend all S&OP monthly meetings. While not all stakeholders will report, it is necessary that they are all on the same page. The participants might include:

Measurable approach

Crossing silos for input reduces finger-pointing. The process also increases responsibility and accountability within each department. This activity drives productivity and fulfillment.

The S&OP process can manage a top-down and a bottom-up leadership style. Top-down planning has executives setting goals and departments determining tactical action plans. Bottom-up planning addresses capabilities and timely throughput.

Either approach is acceptable when acquiring monthly measurements. This brings reality into the mix and allows for the alignment of any group that is missing its mark. Six Sigma master black belts can troubleshoot to find ways of reducing bottlenecks.

The only variable becomes the actual measurement assessments. This will take time to educate those providing input. Projection models must keep within the + and – 5% of accuracy.

Identifying stakeholder's roles and responsibilities is the first step in validating the accuracy.

Roles and responsibilities

The various combinations of stakeholders and products determine the roles and responsibilities. This article will only focus on a few examples.

Executive management

Someone from the executive management team chairs the executive S&OP meeting. This person becomes the arbiter that facilitates discussions and settles disputes. They are the ultimate decision-maker with the weight of the process in their charge.

This person also oversees the accountability of participants in the S&OP process. Each vice president will hold their departments accountable. In the S&OP meeting, participants will answer to the executive chair.

Sales and marketing leader

This leader holds the participants in the sales funnel accountable to improve forecasting. They will many times work with all who touch the funnel on what qualifies for each category measured. This might include the weekly updating of the funnel to get a handle on what the monthly report will look like.

This leader is the primary spokesperson for the sales team. They will speak to performance and alignment issues. They will also direct the sales team through the implementation of adjustments.

Sales personnel

Executive S&OP meetings can pull more people in to answer detailed questions. Most requests will invite the account executive in to speak about their customer. Larger projects might also need extra people for strategic purposes.

Projects that might alter the current production and distribution process may generate questions. Individuals related to those projects are responsible for sharing their customer intelligence.

These leaders also feed the sales funnel to set an accurate forecast. Regular funnel updates are critical for projects closing outside of the normal process.

For instance, let's say the typical sales cycle is six months. Let's also say that the project uses 7% of the operational capabilities. Most people are comfortable with the above, so it is within the standard activities.

But if a project takes 18 months and uses 45% of operational capabilities, it is out of standards. The leader needs to know and articulate the difference. His recommendations to maintain a + and – 5% level of accuracy must be achievable.

The leader must know the actual versus forecasted sales performance. He must provide this information when requested.

Demand planner

The demand planner must have a good handle on analysis and statistical data. You must include accurate information from sales and operations in their summary. This leader sets the specific demand plan in play based on all information that rolls up to them.

The demand plan delivered at the meeting becomes law until the next meeting and must be accurate. Anything that appears off-plan is reported to the S&OP team for corrective action. Issues are addressed, and action plans are assigned for each area of concern.

Operational and supply plan creation is like project plans. They need a clear scope, measurable objectives, and quality control. 

Operations leader

This leader delivers the expectations of manufacturing/production, including materials and availability. They oversee the supply plan, including the process, execution, and cost savings. They must be able to answer any questions related to the supply chain, from inventory to backlog.

As is true with all leaders, they must have a handle on their measurements. This includes the actual results compared to the forecast and the drives that led to the outcome. This leader is the primary contact for strategic issues and the execution of the supply plan.

Supply planning/master scheduling

This data-rich leader addresses the tactical issues related to the supply chain. They capture inventory updates and notate the differences between actual and plan. Included in what they manage are the following:

The leader will answer questions in the S&OP meeting. Their answers include inventory details, specific orders in question, and due dates. This leader will know what needs to be built and by when to meet the operational plan. They are the primary contact for all things tactical within operations.

6-Step S&OP process

There are several variations of the 6-step order. Each company chooses its terminology. But the underlying content with each step remains intact.

1. Data review and forecasting

The data gathering process includes organization according to measurements. The categories of data include past sales, market trends, and market speculations. The most crucial factor to document is the analysis of the data for accuracy.

While this is a sales exercise, more companies are including supply chain KPIs.

This second perspective helps distinguish obstacles that are both internal and external. The resulting analysis will feed information for the development of a reliable forecast.

The data analysis process can inform new and discontinued product information. The key is making sure the data reveals the entire story. Production and distribution schedules address launch and discontinued dates.

The results can also inform the planning process with proven benchmarks worth achieving.

This might include the change of supply policies, stocking requirements, and lead times. Consistent numbers have the power to alter FIFO and LIFO rules on a per-product basis. Also affected, supply increases or decreases for demand products in specified time periods.

2. Demand planning

Once the forecast is presented, demand planning must validate the forecast. This takes a lot of insight that comes from understanding the source of demand. Communication with sales and operations is critical for success.

The accuracy of the forecast improves when variable measurements increase consistency. Consideration of the demand source might also lead to policy revisions. This is dependent on customer service levels.

In each case, discussions with specific departments will strengthen the decision process.

The inclusion of marketing plans will affect the accuracy of the forecast. The impact will show up in events, customer pre-sale interaction, and customer-specific launches. Sales should stay involved in this side of the process to verify that the plan's intent remains intact.

The accuracy of metric reporting can improve through triangulation. The three points of comparison include customer-specific reports, sales efforts, and sales funnel. Sharing these reports will provide visibility and validity for the meetings.

The departments can form a consensus on forecasting-based decisions. The consensus might drive plan changes due to bottleneck insights gained.

Some companies choose to establish a freeze period while items are in review.

The longest lead-time determines the freeze period. This protects decisions through their measurable course.

Switching between plans within a single release window tends to invalidate agreed-upon measurements. To gather enough healthy data, consistency must be part of the process.

The finalized demand plan includes the cumulation or consensus of departmental input. The published review also consists of the quantitative-based assumptions that drove the numbers. This exercise produces the most accurate demand plan possible within an always-changing marketplace.

3. Supply and production planning

There are two goals involved in developing the supply plan. The first goal is for the plan to bring a realistic view to sales and customer service. The second goal is to reduce inventory and costs.

To succeed, the planning process must include representatives from operations, finance, and materials. Another success ingredient is assessing the capabilities and capacity constraints. The assessment must reflect the demand plan.

The assessment must use the same language for comparison. This requires the translation of the demand plan—select terns for inventory targets, safety stock levels, and level loading.

This extra step will reduce non-value-added process cycle times.

Chase demand strategy

Other considerations include a chase demand strategy. Measured experimentation can start using the below strategies:

  1. Setting a constant rate of fulfilling demand with inventoried goods
  2. Hiring and firing labor according to demand
  3. Maintenance of resources during high-demand periods
  4. Reducing labor hours
  5. Positioning workers as part-time jobs
  6. Pushing out the rendering of the product

The tactical is level set for the review of capacity, inventory, and operations schedule. Logistics can join when needed. Attendance is critical when stock movement hits an obstacle during periods of crisis management.

Some of the greatest brainstorming solutions come in meetings exploring "what-if" scenarios. Digital scenarios or round table speculations can test the hypothesizes. The exploration will help the team prevent shortfalls of product and overstock.

Employee risk mitigation

A regular review of what-if scenarios will keep the team alert. They will know when to mitigate risk by shifting to a backup plan.

Reviewing operations from a risk management perspective brings an understanding of market shifts. This also helps management explore re-balancing the workforce before implementation.

Human resources should join the discussion under two conditions. The first is when variables show up as visible patterns. This suggests that the onboarding and lay-off process needs a rewrite.

The second is when cost-cutting suggestions consider reducing employees to part-time help. Finance can conduct risk assessments on potential outcomes of required downsizing and lay-offs.

4. Pre-S&OP meeting

This preliminary meeting combines and reconciles all inputs into a cohesive plan. Since it is difficult to get everyone in the same room, the meeting is more likely to be a series of shorter meetings.

Regardless of how many prep meetings occur, the goal is to find and overcome any disconnects.

Someone in the meeting records the plan and its metrics. The data is then displayed in a visual dashboard. The team can clearly understand the whole picture at a glance.

This format, stored in a single place, would be accessible by all attending the exec-S&OP meeting.

This joint meeting will generate strategies based on the data and forecast presented. The data and its report are typically stored in the cloud for easy access. The use of software for Sales and Operations Planning gives access to all decision-makers.

Anyone in management would gain clarity from the big picture. Specific measurements are also accessible.

The dashboard metrics must reveal the revenue, profit, and costs. Specific categories for review include inventory, logistics, and other types of information. The corporate executives are able to assess and track any and all metrics.

The financial implications must be clear based on the decisions made. Executives have the ability to drill down and scrutinize specific issues. This can include items that bring insight or require team follow-up.

This includes any variances against actuals and projections. Lower-level details could focus on the family of product summaries.

The demand planner would make a good facilitator of the pre-S&OP meeting. This leader can reach out to departments to validate the data and its outcomes.

5. Exec-S&OP meeting

The result of the meeting is an implementable and approved demand and supply plan. To that end, the meeting tone can't be one of beating up those who are missing critical information. The atmosphere must support issues in a constructive manner.

This safe environment intends to resolve any weak, incorrect, or missing data.

The recommended tactical and strategic plans must be from a realistic standpoint. When functional heads hold differing views, the discussion must focus on the merits of the recommendation. This discussion must be candid and constructive.

Should any tactical plans not align with the strategic, you must consider differing opinions without bias. After all, a month later, the final decision's outcome reveals the results.

Facilitating the meeting

To better facilitate the meeting, the S&OP leader must start with an executive summary. The posted dashboard results will provide perspective for strategic and tactical plans. The summary needs to include:

The executives are then in a position to review the rolling 12-month demand and supply plan. This review, coupled with the rolling actuals, will reveal problem areas. Each one subject to alterations based on updated historical data.

Capturing the data

A snapshot evaluation from the rolling data can leverage the following:

The executive S&OP meeting provides a large amount of benefit when the effort is clear. The outcome benefits include:

All the above are measurable.

6. Finalize and implement

With the finalized plan in hand, due diligence begins. Weekly and monthly financial and metric reviews help keep the team on target. Consistent reviews catch more areas requiring management intervention.

The metric reports use criteria that are pertinent to multiple departments. The key operational metrics include:

The key financial metrics include:

The company's metrics need to be posted in a visual dashboard manner for a quick read. Hunting through a spreadsheet will deter critical and necessary instructions.

Executive support

The most important benchmark for the S&OP process is the executive's participation. This is the stakeholder who owns the overall P&L. This might be a VP of a division or the CEO of the company. Success only comes through their integrated participation.

The executive stakeholder's participation will override any compromise that you must reach. The stakeholder can also leverage the discussion. The adaptation of best-in-class practices will move the company to another level.

When an executive stakeholder lacks commitment to the process, functional leaders solve issues on their own. This is done using a filter of what is best for their department, not the company.

This choice drives cross-departmental friction, confusion, and a drop-off in overall performance. The S&OP process must be cross-functional for the health of the company.

The Sales and Operations Planning process allows executives to leverage a department's tactical knowledge. The knowledge can drive cross-functional alignment and collaboration.

In other words, the forum can drive awareness. Each department learns about each other's investment of time, budget, and labor.

The S&OP process facilitates a clear vision. It also develops a team willing to work together for a common and profitable outcome.

In other words, it takes the focus off of each department and puts it on the entire company. This also presents opportunities for a synergy that will benefit all participants.

The number of surprises moving forward will decrease. The forecasting process will become refined within a + or – 5% accuracy rate. And, the joint team will find bottlenecks that will increase margins once removed.

S&OP process drives success

Communication between sales and supply chain helps the S&OP process. Knowing each stakeholder's roles and responsibilities will drive the 6-step Sales and Operations Planning process.

Additionally, the Sales and Operations Planning process empowers data-driven decisions. It also holds all departments accountable. Whenever someone misses the plan, the forum facilitates corrective action.

As a result, it's essential that you have one source of truth to plan and execute your sales and operations planning process. You can manage the entire planning and execution process with software like TrueNxus, which is built for cross-functional teams.

Start your 14-day free trial today.