Cross-functional Capabilities: Sales & Operations Planning (I).

Sales and Operations Planning (known as "S&OP") is one of the key cross-functional capabilities that really make a difference in the market. However, the S&OP capability is like going to the gym: everybody has the membership but few really do exercises frequently. It means, when you ask if you do S&OP, almost invariable everybody responds: "we have a S&OP in place". The reality is that they may have some meetings, but not really a S&OP capability.

The S&OP is the capability (i.e. the right combination of process, people and technology to create a competitive advantage) that transform the Business Plan to the execution, through the balancing of the demand and supply in a profitable way. It involves several functions of the company. In the demand side: sales, marketing, new product development, key account managers, i.e. the part of the company that plan and execute the "generate demand" part of the business. In the supply side: manufacturing, supply chain, logistics, procurement, i.e. the part of the company that plan and execute the "satisfy demand" part of the company. Another key actor is the financial part of the company: they are the ones who will help to decide, based on the numbers: revenues, costs and profitability expected from a S&OP decision.

Based on an Abeerden Group research ("Sales and Operations Planning. Key Enabler for the Supply Chain Officer" August 2011) the top business pressures that leads the company to design and implement this capability are:

- Reduce supply chain costs - 54%
- Improve top line revenue - 46%
- Managament of increasing volatility - 43%
- Customer mandates for faster, more accurate and more unique fulfillment - 37%
- Need for better tighter integration between planning and execution - 34%


The paradigm of the S&OP is to generate "one plan" in the sense described in my previous blog (see http://bauzanotebook.blogspot.mx/2013/05/blog-post.html). The benefits that this capability will bring to the company are very important and tangible, and are tipically in:

- Improvements in on-time in-full delivery to the customers
- Rationalized inventory levels
- Less manufacturing downtime
- Better plant efficiency
- Lower transportation costs

In the soft side, the benefits are:

- Enhanced teamwork
- Better decisions
- Better financial plans
- Greater control
- Better visibility of what can happen in the future

In the following blog, I will explain in more detail how is the S&OP process and how to get these benefits.