24 May 2011

Sales and Operations Planning - An ongoing journey to optimised business performance

Daniel Paterson
TXT e-solutions

Delivering value
Since its outset over 20 years ago, Sales and Operations Planning (SOP) has become a widely recognised process for driving business performance and has never been more important than it is today. Recent study supports this by finding that the top objective for organisations in using SOP has changed from simply improving forecast accuracy in 2007 to increasing revenue and profitability in 2009/2010. Despite most companies having some form of SOP process in place, there is still a lot of confusion as to how to get the most out of this process. Frequently asked questions are: How do I turn SOP into a successful reality? Why aren’t I seeing all of the business benefits? What are the steps to further our SOP maturity?


I can see the potential but where do I start?
While the potential benefits are well documented, too often these are not translating into real value for the majority of today’s organisations. For those organisations that already have a working SOP process in place the objective is different, it includes the need to move the process forward and questions why it hasn’t lived up to all expectations. To be successful SOP needs to be the heart beat of the company; it is a business process that everyone must live and breathe, and is NOT a supply chain project.

The path to SOP maturity, can be broken down into 4 different stages.

Stage 1: Local Operations Planning - React
In its simplest form stage one of the SOP process is used to maximise warehouse order fulfilment and increase asset utilisation. A basic forecast is created with a heavy operations focus; generally in isolation with the rest of the business.

Stage 2: Standard Enterprise SOP - Anticipate
Stage two is the beginning of becoming demand driven and creating cross functional teams and cross functional metrics. The demand forecast takes into account a basic level of sales and marketing data. New metrics are used to measure success, including inventory performance and forecast error. The SOP meeting itself is used to inform everyone of the plan and refine any last minute issues.

Stage 3: Downstream Demand Translation - Collaborate
Stage three sees the implementation of the demand driven plan. Demand shaping opportunities become a vital input for creating a realistic demand plan that takes into account supply constraints while to some extent considers strategic and financial goals for greater long term profitability. Key metrics used include forecast accuracy, perfect order, revenue and profitability, inventory, customer service and total costs. The SOP meeting ensures there is joint ownership across the board to develop cross functional thinking without any silos. The agreed plan is published and used as a base for the next SOP plan.

Stage 4: Integrated Business Planning - Orchestrate
Integrated Business Planning is the evolution from a demand driven SOP process to one that is totally cross-functional and multi-dimensional. It provides complete visibility of the entire value chain. A complete picture of future demand is able to be built, taking into account demand shaping opportunities and uses what-if scenarios to analyse whether they can be fulfilled or not. Metrics are now focused on the entire extended supply chain and are designed to improve integration and relationships with all partners. The monthly SOP meeting creates consensus agreement while ensuring the plan is in line with strategic and financial goals for maximum profitability. The plan is published and constantly measured to track actual performance against targets and is used as a base for the next SOP plan.


The biggest challenges in SOP
While the greatest benefits are naturally found at the highest level of SOP maturity, each of these four stages has its place depending on how mature the individual business is.

The Top 4 on the list of challenges are in order of importance:

  • Coordination of global teams
  • Getting plan agreement
  • Moving from demand and supply matching to profitability as a goal
  • Driving the use of the plan in daily operations


Supply chain AND business priorities are driving SOP deployment. The top 5 priorities as reported by PRTM in 'Supply Chain trends 2010- 2012' in order of importance:

  • Effective inventory / stock management
  • Service innovation and product life cycle management
  • Improve delivery performance to customers
  • Focus on profitability and cast management
  • Reduce company’s carbon footprint


While SOP has evolved significantly over time as supply chains have become more complex, the vast majority of companies are somewhere between stages 2 and 3 in their maturity journey. The common themes from the SOP event and the challenges identified shows that for most organisations there is a lot of work to be done in order to have a best in class SOP process.


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TXT e-solutions
Daniel Paterson
Product Marketing Executive





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