Sales and Operations Planning (S&OP) was introduced almost 30 years ago by Richard Ling and Walter Goddard as an integrated business management process that provided an aligned and synchronized process across all functions of an organization. Initially S&OP focused on demand planning, supply planning and the coordination of the sales and marketing departments to meet consensus and ensure right product, right quantity at the right place. Since then the S&OP planning has evolved into SI&OP, generally known as Sales, Inventory and Operations Planning, however, the term was used originally by the United States Military as Single Integrated Operations Planning from the 1960s to early 2000, the relationship between the two and the arguement that the concept was originally adopted from the U.S Military is largely uncomfirmed. From a business perspective, SIOP integrates demand planning, supply planning, current stock on hand and pipeline inventory into the planning process which ensures a more robust planning for an organisation.
Currently S&OP or SIOP has evolved more into Integrated Business Planning (IBP) as it is known today. S&OP includes sales forecast that leads to net requirement forecast that is translated into production and inventory plan. It takes into account production and procurement lead times, new product development plan, strategic initiative plan and resulting financial plan. Generally an implemented S&OP process cyclically reviews customer demand (internal/external)—known as the Demand Review Cycle (not to be confused with “Planning Cycle”) — and supply resources, then updates systematic planning across an agreed rolling horizon. Depending on the industry and organisation, the rolling horizon ranges from 12, 18 or 24 months planning horizon The cyclical planning updates focus on changes from the previously agreed sales and operations plan, at the same time helps the management team comprehend how the company achieved its current level of performance, its primary focus is on future actions and anticipated results.
Plan frequency and planning horizon depend on the specifics of the industry. Short product life cycles and high demand volatility require a tighter S&OP planning than steadily consumed products. Done well, the S&OP process also enables effective supply chain management. Organisations required customized S&OP process based on their industry. Here’s a list