Balancing supply and demand made easy thanks to the S&OP process

A company's success is the result of a perfect alchemy between the value proposition of its offering, consumer expectations, sound financial management and the efficiency of its sales/marketing departments.

The good news is that it is possible to achieve this synergy and (finally!) break down silos thanks to a salutary approach: the S&OP process.

By aligning demand, supply and resources, Sales and Operations Planning optimises the performance of organisations, while ensuring their profitability. Sounds pretty interesting, doesn't it?

But you still need to understand the ins and outs of this procedure, and know how to deploy it intelligently.

This article explains all that to you 😉

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What is sales and operations planning (S&OP)?

The S&OP process: definition

Sales and Operations Planning, or S&OP, defines an integrated decision-making process, generally carried out on a monthly basis. It involves anticipating customer needs, with the aim of better managing your supply chain and resources, while keeping your finances under control.

In short, it's about balancing supply and demand.

S&OP is based on several stages:

• product review ;
• demand forecasting ;
• supply planning
• reconciliation of plans
• validation by management.

👉 We'll come back to these different stages in detail later in the article.

Who are the S&OP players?

Given its holistic approach, the S&OP process naturally involves many departments within the company.

To summarise

• Sales and marketing forecast sales, based in particular on trend analysis;
• the supply chain and operations adjust production and stocks;
• Finance monitors profitability;
• General Management makes decisions and sets the company's strategic direction.

How important is the S&OP process? The 5 key benefits

• ✅ Improved decision-making. The primary objective of Sales and Operations Planning? To provide an overall view of operations, through, among other things, the implementation of various scenarios. This enables the company to develop truly relevant action plans.
  
  
• Seize business opportunities. The S&OP process enables you to take account of market behaviour in real time. As a result, you can respond nimbly to consumer demand, without letting your competitors steal your thunder.
  
  
• Mitigate risk. With its proactive approach, S&OP helps to identify problems before they affect the supply chain. This reduces the risk of interruptions and improves the company's resilience in the face of market uncertainties. What's more, satisfying customer demand in all circumstances also makes you a player they can count on!
  
  
• ✅ Achieving profitability. Your objective: to respond diligently to demand... without losing money (through overstocking, wastage, etc.)! Sales and Operations Planning helps you achieve this balance.
  
  
• ✅ Collaborate more. S&OP is one of those processes that involves breaking down silos. By encouraging close collaboration between different departments, it creates synergy between employees, who are then more willing to work together to achieve the company's common objectives.

The S&OP process: an example of the steps to follow to ensure it runs smoothly

Stage 1: Product review

This first stage involves an in-depth analysis of your product portfolio, to ensure that it remains in line with consumer needs.

To do this, the product team, and sometimes R&D too, examine market behaviour.

• How is your product offering currently performing?
• Are certain products reaching the end of their life cycle?
• Should you plan to introduce new items, or discontinue others?

☝️ This phase is an opportunity to boost your capacity for innovation, always in line with your strategic needs.

Stage 2: demand planning

Next you need to collect a lot of data.

However, you need to adopt a top-down and bottom-up approach, with a global approach to forecasting.

In other words :

• base your forecasts on data in the field, in particular from the sales and marketing departments (past sales, future forecasts based on planned actions, etc.) ;
• as well as internal and external analyses of market behaviour and statistical models.

☝️ This operation must be carried out at the level of the entire offering, as well as at the product level.

Stage 3: supply planning

Now that you have a clear picture of demand, it's time to plan supply.

More specifically, this phase involves assessing whether the production capacity and resources available within the company can meet the forecast demand.

However, it is important to take account of external constraints, which are sometimes more difficult to anticipate (shortages of raw materials, problems with suppliers, etc.).

Stage 4: Reconciling the plans

At this stage, consolidate the demand and supply plans, so as to identify any discrepancies and the resulting adjustments required.

The finance department plays a key role here:

• it ensures that operational plans remain in line with the organisation's financial objectives ;
• it assesses the implications of potential variances on revenues, costs and profitability.

Stage 5: the Executive Committee

The S&OP Executive Committee is the final phase of the process. At this stage, senior management examine and approve (or not) the consolidated plans.

This final check ensures that the planned strategies are in line with the company's overall objectives, and that resources are allocated correctly.

The tools of the S&OP process

Although S&OP has long been applied within companies, the process has taken a new turn in recent years: that of artificial intelligence and machine learning.

Where managers used to operate using static spreadsheets, they now use tools capable of :

• simulate various scenarios;
• integrate large quantities of data, in real time (from the various departments, but also relating to the market).

☝️ This last point underlines the importance of using tools that integrate with your other systems, in particular your ERP and CRM systems, to ensure that information flows smoothly and reliably.

🛠️ Software example :

Ganacos' flexible S&OP solution, aimed at SMEs and large groups, helps you to manage your Sales and Operations Planning in a collaborative and agile way. Connected to all your data, this software enables you to draw up reliable forecasts, in favour of a better balance between supply and demand. Create several scenarios and anticipate changes in your business as effectively as possible.

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5 best practices to optimise your S&OP process

#1 Organise the process effectively

The S&OP process must involve everyone in the company if you want to obtain a global view of operations. But also the various stakeholders upstream (suppliers, for example) and downstream (end customers).

💡 However, given the various functions involved, it is advisable to appoint a single person to lead the meetings and coordinate the actions.

#2 Rely on reliable data

Working on the basis of correct and exhaustive data is, to some extent, the sine qua non for the success of the process. That's why you need to use a tool that can compile all this data and make it reliable.

You should also use the indicators that are most relevant to the S&OP challenges. For example

• OTIF (ability to deliver orders on time and in full) ;
• Customer Service Level (does the company meet customer expectations in terms of product availability and delivery times), etc.

#3 Communicate effectively

Good communication is another key to success.

So organise regular meetings and use tools that simplify exchanges and collaboration between the various departments involved.

Remember, the S&OP process goes hand in hand with a holistic view of procedures!

#4 Make information easy to understand

We recommend that you use dynamic visual aids during meetings. This will make it much easier for everyone involved to lead discussions, compare different scenarios and visualise operations.

Understanding information is the first step towards making informed decisions. 💡

#5 Adapt the process continuously

The S&OP process needs to be flexible in order to respond to the various changes likely to impact it, whether internal developments or market fluctuations.

By regularly reassessing forecasts and capacities, you can quickly identify any discrepancies and adjust plans in real time.

See all software Supply Chain Management

The S&OP process in a nutshell

As the market becomes more complex, new challenges await companies. Aligning supply and demand, without losing money, is one of these challenges.

This is what we call the S&OP process. Thanks to the S&OP process, the silos that compromise collective intelligence are a thing of the past: sales, marketing, management, supply chain and operations work hand in hand to develop the most appropriate plans in the light of their constraints.

But this work can sometimes seem complex, especially for large organisations. Fortunately, there is software you can rely on. Often augmented by AI, they collect the (many!) data required for analysis, anticipate all situations and suggest the subsequent action plan.

The result is finer-tuned production planning, ensuring that you make the difference with your customers... without losing any feathers!