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Abstract
Sales and Operations Planning (S&OP) initially came to existence in manufacturing in the late 1980s and has been around for
about three decades now. It is the long-term collaborative planning process of production levels relative to sales within the
realm of a manufacturing planning and control system at the Stock Keeping Unit (SKU) level. S&OP has evolved into a major
business process adopted to manage the balance and trade-off between the conflicting preferences of the supply and demand
side of the supply chain and offers many value creation opportunities. It is one of the most critical business processes used
to achieve best in class performance to consistently outperform competitors. It is increasingly being viewed as essential to
synchronise the entire supply chain in order to improve its efficiency, as once the S&OP process is institutionalised, it will
enhance supply chain efficiency in the long run. It will also help the supply chain partners to understand and overcome supply
chain risks resulting from market volatility. For this, firms must develop and deploy excellent leadership capabilities so that
S&OP processes are in place and supported well within and across the supply chain.
Although easy to understand, S&OP can be difficult to implement. Explaining the importance and working of S&OP, defining the key S&OP objectives and the role of people, process and technology, this article tries to address many evolving S&OP
related operational issues from the people, process and supply chain perspective. It also prescribes practical ways to improve
and institutionalise a strong S&OP process within a firm and consequently across the supply chain. Thereafter, it provides a
useful framework to forecast ownership and suggests as to what should be discussed in S&OP meetings. Finally, it highlights
the need to align the plans on a continuous basis and suggests a framework for the same.
Keywords: Forecast Ownership, Framework, Key Objectives of S&OP, People and Technology, Role of Process, Sales and
Operations Planning, Supply Chain Efficiency
1. Introduction
Supply Chain, Philips Electronics India Ltd., 9th Floor, DLF 9-B, DLF Cyber City, Gurgaon, 122002, India; e.rakesh.k@gmail.com
Operations Management Group, Indian Institute of Management, Lucknow 226013, India; samir@iiml.ac.in
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Table1. Sample data sheet of a simple annual sales and operations plan
Product category X
Jan
Feb
Mar
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Total
74
78
71
139
174
106
109
145
120
107
184
133
1440
124
119
119
125
116
119
130
127
134
145
176
153
1587
Actual sales/forecast
107
121
130
186
123
104
122
111
118
127
155
145
1549
Last forecast
140
135
115
140
110
114
174
90
99
126
120
120
119
135
124
1471
150
150
150
150
150
150
150
150
150
150
150
150
1800
57
56
52
60
61
54
62
63
63
18
Apr
63
67
69
Metamorphosis
supply exceeds demand (e.g. increased advertising expenditures, pricing adjustments, new promotional activity),
or how to dampen demand when demand exceeds supply
capacity (e.g. reducing advertising, raising prices, discontinuing promotional activity and offering incentives to customers). At the strategic level, decisions can be made about
opening new markets or expanding distribution outlets
when capacity exceeds demand, or about expanding supply
capacity when demand exceeds supply. It should be emphasised that these types of decisions, both tactical and strategic,
cannot effectively be made without the shared interpretation of knowledge that occurs in the S&OP process.22
Lapide27 observes that the S&OP process is always a
work-in-process since the personalities of the participants
frequently get in the way of developing consensus-based
plans. We also found that although there is a singular data
in the final S&OP plan, different stakeholders see the same
data from their own perspectives. The supply planners look
from the perspective of product, sources and budgetary
allocations; the manufacturing and logistics personnel look
in context of product families, capacity and destinations;
the finance personnel look from the perspective of revenue,
margins and working capital; sales and marketing personnel look from the perspective of market share, channels
and brands; and the demand planner looks from the perspective of forecasts, new products and promotion plans.
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Week 2
Week 3
Week 4
Supplier
name
% Hit
% Miss
% Hit
% Miss
% Hit
% Miss
% Hit
% Miss
44
56
60
40
58
42
56
44
100
100
100
100
100
17
83
92
94
67
33
83
17
91
94
100
100
99
100
and shared dynamic ownership as per changing roles of different stakeholders over the planning horizon. Their KPIs
need to be designed accordingly. The framework divides the
ownership of business forecasts into three stages during the
whole planning horizon. These correspond to periods 12,
36 and 718, respectively, for an 18 month planning horizon where each period is of one month duration. There will
be a transition in terms of ownership and accountability at
the ends of period 2 and period 6. The number of periods as
well as transition-periods is only suggestive and may be suitably modified by different firms to suit their specific needs.
The framework suggests that the ownership of numbers
should be pre-dominantly with the supply chain or value
chain function for the third stage (period 718 months).
We suggest 50% ownership of business forecasts for this
function. The firm may plan new introductions as well as
forecast data for existing products. These forecasts should
be based on statistics and hard data and should be purely
scientific. Emotions should not have any role in these forecasts. As many inputs come from sales and business management function, they are each assigned 25% ownership.
The business management function has a major role in the
second stage (period 36 months). Here, it needs to take
into account the trend and take corrective actions. As it
may influence the statistical demand by utilising business
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2. Managerial Implications
100
200
100
SKU2
2500
2500
3000
500
500
SKU3
900
3600
2000
1100
4400
SKU4
1500
3000
1000
-500
1000
SKU5
2000
6000
1900
-100
300
SKU6
360
1800
300
-60
300
Total
17100
1600
4900
Metamorphosis
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OR techniques that model all sorts of demand using whatif analyses may be tried. Further, as there is a lack of credible competitive benchmarks on S&OP; the same need to be
developed. Supplier-manufacturer and manufacturer-customer relationships through contracting and collaboration
in S&OP context present other interesting areas of research.
4. References
1. Feng Y, DAmours S, Beauregard R. The value of sales and
operations planning in oriented strand board industry with
make-to-order manufacturing system: cross functional
integration under deterministic demand and spot market
recourse. Int J Prod Econ. 2008; 115(1):189209.
2. Oliva R, Watson N. Managing functional biases in organizational forecasts: a case study of consensus forecasting in supply chain planning. Prod Oper Manag. 2009; 18(2):13851.
3. Lapide L. Sales and operations planning part I: the process. J
Bus Forecast Methods Syst. 2004a; 23(3):1719.
4. Olhager J, Rudberg M, Wikner J. Long-term capacity management: linking the perspectives from manufacturing
strategy and sales and operations planning. Int J Prod Econ.
2001; 69(2):21525.
5. De Kok T, Janssen F, Doremalen JV, Wachem EV, Clerkx M,
Peeters W. Philips electronics synchronizes its supply chain
to end the Bullwhip effect. Interfaces. 2005; 35(1):3748.
6. Grimson JA, Pyke DF. Sales and operations planning: an exploratory study and framework. Int J Logist Manag. 2007;
18(3):32246.
7. Slone RE. Leading a supply chain turnaround. Harv Bus Rev.
2004; 82(10):11421.
8. Fairchild A. Intelligent matching: integrating efficiencies in
the financial supply chain. Supply Chain Manag. 2005;10(3/4):
24448.
9. Muzumdar M, Fontanella J. The secrets to S&OP success.
Supply Chain Manag Rev. 2006; 10(3):3441.
10. Affonso R, Marcotte F, Grabot B. Sales and operations planning:
the supply chain pillar. Prod Plan Control. 2008; 19(2):13241.
11. Kumar R, Srivastava SK. Towards improving sales & operations planning process. Proceedings of the 19th Annual
Conference of the Production and Operations Management
Society; La Jolla, California, USA; 2008.
Metamorphosis
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