What Is Sales And Operations Planning (S & OP), And What Is Its Significance In Supply Chain Management?
In any company sales department or function goes about selling whatever it can sell to whosoever is ready and willing to buy (more or less).
On the other hand, simplistically speaking, the production department of function goes about producing whatever it can produce under the constraints it is operating under.
Now imagine what would happen if these two departments never talked to each other.
You would have mountains of goods that no customer wants (because no one told the production department), and you would have hordes of very angry customers who did not get what they were ready to buy (because no one told production what the customers wanted).
Of course this imaginary situation never happens because sooner, or later, someone in sales talks to someone in production and tells them what is hot, and what is not with the customers.
Sales and operations planning (S & OP) is the formal mechanism to make this conversation happen systematically, regularly and effectively. It is also referred to as aggregate planning.
Executive-level management meets regularly to review the projections for demand and supply and financial impact, which results because of it.
Sales and operations planning is a decision-making process, which makes sure that the tactical plans and the business areas are in sync with each other and the overall vision and mission of the company.
When And Where Did S & OP Start, And Why?
Even before supply chain management started as a discipline to integrate various departments of the company and optimise their joint outputs - S & OP was already popular as an integration mechanism between sales and operations. Without this integration all production would grind to halt sooner or later burdened by inventory and debts.
It is difficult to determine with certainty where S &OP originated, and when - but it is reputed to have originated somewhere in the factories of the industrial Britain most likely between the two world wars.
What Are Some Of The Other Related Supply Chain Plans, And How Do They Relate To The Sales And Operations Planning?
Supply chain management is all about planning, execution and control. Planning starts well ahead sometimes up to five years in advance when you talk about the long term plans.
Earnest planning starts at lest six months in advance. Besides the plans shown in the diagram below which are part of the same planning hierarchy other related plans are inventory plans, purchasing plans and production plans - as well as their related short term schedules.
Why Does S &OP End Up Being Such A Frustrating Experience In Real Life?
In a highly acclaimed published article "Demand is From Mars, and Supply is From Venus" we likened the conflict between the demand and supply to the on-going battle between the sexes.
To appreciate the frustration, and the reason for it, it is worth reading the entire article in the link.