There are many ways to manage demand and supply planning activities. In most larger companies, the Sales and operations planning (S&OP) process is the most common. S&OP is at the heart of balancing supply and demand, and aligning the company around a common financial, demand and supply plan. It is an integrated business management process through which management continually works to achieve alignment among all functions of the organization.
Smaller companies can benefit greatly from this approach. Most try to facilitate the process using spreadsheets and data pulled from the ERP. The problem, volatility of demand, uncertainty of supply, and increasing customer expectations are challenging companies in their goal to maximize business opportunities and minimize risk. Spreadsheets just cant cut it.
There are many components to S&OP plans. In most situations an S&OP plan includes an updated sales plan, production plan, inventory plan, new product development plan, and a resulting financial plan. At the highest level, these plans are designed to achive the financial and strategic objectives of the company.
In most companies, the planning frequency is monthly and planning horizons are 12 months. Situations in which there are short product life cycles and high demand volatility require a more frequent S&OP planning schedule.
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 primary focus is on future actions and anticipated results.
DemandCaster methodology includes all elements of a robust S&OP process. It follows the traditional 5 step S&OP process described below.
Sales and Operations Planning Steps:
- Data Gathering: Collect data on past sales, analyze trends, and report forecasts
- Demand Planning: Validate forecasts, understand sources of demand, account for variability, revise inventory and customer service policies.
- Supply Planning: Assess the ability to meet demand by reviewing available capacity and scheduling required operations.
- Reconciliation of Plans: Match supply and demand plans with financial considerations
- Finalize and Release: Finalize the plan and release it to implementation