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Concept
Sales and operations planning
Summary
Sales and operations planning (S&OP) is an integrated business management process through which the executive/leadership team continually achieves focus, alignment, and synchronization among all organization functions. The S&OP process includes an updated forecast that leads to a sales plan, production plan, inventory plan, customer lead time (backlog) plan, new product development plan, strategic initiative plan, and resulting financial plan. Plan frequency and planning horizon depend on the specifics of the context. Short product life cycles and high demand volatility require a tighter S&OP than steadily consumed products. Done well, the S&OP process also enables effective supply chain management.
The Sales and Operations planning process has a twofold scope. The first scope is the horizontal alignment to balance the supply and demand through integration between the company departments and with suppliers and customers. The second aim is the vertical alignment amid strategic plan and the operational plan of a company.
A properly implemented S&OP process routinely reviews customer demand and supply resources and "re-plans" quantitatively across an agreed 'rolling' horizon. The re-planning process focuses on changes from the previously agreed sales and operations plan; while it helps the management team to understand how the company achieved its current level of performance, its focus is on future actions and anticipated results.
S&OP was developed with the concept of aggregated production planning (APP) in the first part of 1950, then switched to manufacturing resource planning (MRP 2) around 1985, till the current definition of business process for the alignment of supply and demand. The term S&OP and its modern meaning were conceived of in the 1980s and are generally attributed to Richard Ling, then a consultant with the management consulting firm Oliver Wight.
Official source
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