Sales and Operations Planning (S&OP) is a proven way for companies to improve their demand plans by incorporating sales and marketing knowledge not contained in the demand history.
Salespeople have knowledge of customer activity, new accounts, and lost accounts that will have an impact on the upcoming demand that the buyers (and forecasting systems) are unaware of. By having regular structured meetings focused on Sales and Operation Planning to collect this feedback from the sales team, the operations and purchasing personnel can incorporate this information into the demand plans improving forecast accuracy which reduces lost sales and overstocking.
Benefits of Sales and Operations Planning
Stephen Crane, CSCP, and Director of Strategic Supply Chain at Wacker Chemicals, noted these Sales and Operations Planning Benefits:
The Challenge in Implementing Sales + Operations Planning
Once you get the sales input during your sales and operations planning process, how do you best incorporate that into the demand forecasts and inventory purchasing plan? Your ERP system or current forecasting and replenishment system probably doesn’t have an automated intelligent way to incorporate that valuable input.
f your current process isn’t automated, it will become increasingly difficult to continue that process. And if there aren’t built in metrics to measure the value add of the Sales and Operations Planning process, how do you know whether the additional effort is making a difference?
Thrive’s Sales and Operations Planning Software + Process
Thrive provides an automated, intelligent methodology to incorporate a Sales and Operations Planning software and process with metrics to measure your improvement.
First Thrive leverages its patent pending demand forecasting engine to generate a forecast report that can be automatically emailed to the sales and operations planning team as an excellent starting tool to collaboratively review. Information included for sales and operations planning purposes includes item number, category, subcategory, velocity code, demand history, twelve month forecast. The sales and operations planning team use this report to make any adjustments to the demand plan based on sales / customer activity.
Then those adjustments are automatically fed back into Thrive to adjust the demand plans. The adjustments from the Sales and Operations Planning meeting automatically and appropriately adjust the inventory replenishment plan up or down. Orders are generated if necessary to cover any additional expected activity above the calculated statistical forecast. Conversely, planned orders are postponed and planned inventory reduced if the Sales and Operations Planning team reduces demand for an SKU based on lower current customer orders or a customer loss.
So that the sales inventory and operations planning process gets meaningful metrics to track progress, Thrive provides feedback as to the accuracy of the Sales and Operations Planning adjustments versus the baseline statistical forecast. Typically we see at least a 2 to 3 point increase in accuracy of the demand plan versus actual with Sales and Operations Planning input. The measurable improvement in timing and quantity of inventory supply gained from Thrive’s Sales and Operations Planning software makes it worth everyone’s effort, and keeps the key players motivated to keep working on the process.