Leveraging advanced S&OP software technology is critical for evolving and optimizing key elements of the Sales and Operations Planning (S&OP) process, as an integral part of the overall supply chain planning strategy. Whether you're new to the concept of S&OP or seeking a deeper understanding of the benefits of S&OP software, this comprehensive guide is designed to provide you with valuable insights and resources to expand your knowledge.
The S&OP process – also sometimes referred to as SIOP (Sales, Inventory and Operations Planning) or IBP (Integrated Business Planning), plays a crucial role in aligning an organization's sales and operational activities to ensure a harmonized and efficient supply chain. Here, we aim to address common queries about the fundamentals of S&OP, its benefits, implementation strategies, and best practices as well as how an advanced S&OP/IBP process can support your organization’s digital supply chain transformation.
If you find that your specific questions are not covered in this guide, we encourage you to connect with our team! Our supply chain experts are available to assist you via live chat or email, ready to provide personalized support to address your inquiries and challenges. We're here to help!
What is S&OP (Sales and Operations Planning) in Supply Chain?
S&OP stands for Sales and Operations Planning. It’s a strategic process that helps organizations align operations and achieve the right balance of demand and supply to meet customer needs, while optimizing resources to support the overall business goals.
S&OP is an integral part of supply chain planning that typically involves cross-functional collaboration between various departments (sales, marketing, finance, operations/production and others, depending on the company's structure and industry) with an aim to make both strategic and tactical business decisions to mitigate risks, leverage opportunities and internal resources, and evaluate actions to reduce the impact of constraints.
What is IBP Process?
Integrated Business Planning (IBP) is an advanced and evolved form of Sales & Operations Planning (S&OP) that addresses the complexities of modern supply chains and strategic challenges in order to maximize the business benefits of planning.
While S&OP primarily focuses on functional siloes and internal optimization, IBP takes planning to a higher level of maturity by aiming to make the best decisions to support critical business objectives (both short and long-term).
IBP recognizes the need for cross-functional integration and external collaboration. It emphasizes a broader perspective by considering the entire end-to-end value chain and ecosystem, rather than isolated supply chain decisions. The goal is to improve overall visibility and enable better trade-off decisions across the business.
This higher maturity level of planning involves aligning strategic, tactical, and operational planning, creating a bridge between strategy and execution. It emphasizes a customer-centric approach, focusing on meeting customer needs and demands. IBP moves beyond the internal scope and incorporates external factors, market dynamics, and customer insights into the planning process.
What is the Difference Between S&OP (Sales and Operations Planning) and IBP (Integrated Business Planning)?
While S&OP is a foundational process primarily focused on balancing demand and supply, the IBP process expands the scope beyond functional boundaries and aims to integrate
various cross-functional areas and external stakeholders, taking a more holistic view of the business and considering the entire end-to-end value chain.
IBP aims to elevate traditional S&OP to support the complexities of current supply chains, address strategic challenges, and make the best decisions for the overall business. Find out more about the key differences between S&OP and a more strategic IBP process.
What Are Essential Steps in the S&OP/IBP Process?
The S&OP process, also known as IBP in more advanced stages of supply chain planning maturity, is a comprehensive cycle comprising crucial processes that work proactively to address key objectives and ensure effective alignment within an organization:
1. Product Portfolio Planning:
This element of the S&OP process focuses on evaluating the existing product portfolio to determine whether it is well-aligned with the company's strategic targets and business objectives. Organizations need to continually assess the relevance and competitiveness of their product offerings in the market. This involves analyzing the product mix, identifying potential gaps or overlaps, and making informed decisions about product introductions, removals, or improvements. Optimizing and updating the product portfolio is critical for enhancing companies’ ability to meet customer demand.
2. Demand Planning:
Demand planning is a critical aspect of the S&OP process that involves forecasting future sales volumes and understanding customer demand patterns. Demand planners use historical sales data, market intelligence, and collaboration with sales and marketing teams to develop accurate demand forecasts. This process helps organizations anticipate customer needs, align production and inventory levels accordingly, and avoid stockouts or excess inventory. By ensuring that demand planning matches the company's ambitions, businesses can optimize their resource allocation, enhance customer service levels, and reduce operational inefficiencies.
3. Supply Planning:
Supply planning focuses on evaluating the organization's capacity, inventory levels, and capabilities to meet the forecasted demand. Supply planners consider production capacities, lead times, raw material availability, and supplier capabilities to ensure that the necessary resources are in place to fulfill customer orders. The goal is to strike a balance between demand and supply, avoiding underproduction or overproduction. Effective supply planning enables organizations to optimize their production schedules, manage inventory levels efficiently, and reduce supply chain risks.
4. Executive S&OP:
The Executive S&OP step is the culmination of the planning cycle where key decision-makers come together to address potential gaps between the established plans and the company's strategic goals. In this meeting, cross-functional teams, including top-level management, finance, sales, operations, and marketing, discuss various scenarios, assess risks, and make strategic decisions to bridge any discrepancies. The Executive S&OP process ensures that the organization is equipped to respond swiftly to changing market conditions, maintain profitability, and achieve its long-term vision.
5. Financial Alignment:
Financial Alignment is a key element of a strong S&OP process. This step involves evaluating the financial implications of different options during the Executive S&OP meeting, aligning the final S&OP plan with the overall business objectives. It ensures that the proposed plans are not only operationally feasible but also financially viable, contributing to the organization's profitability and long-term success.
By integrating these five key elements, organizations can foster better collaboration between various departments, align their plans with business objectives, optimize resources, enhance operational efficiency, and improve supply chain performance. S&OP or IBP acts as a strategic decision-making framework that enables companies to anticipate challenges, make data-driven decisions, and capitalize on emerging opportunities in a dynamic business environment.
What Are Some Key Steps for Evolving Your S&OP Process?
The following 7 steps provide a guideline for evolving your S&OP process:
- Assess Current Tools and Technologies: Evaluate your existing S&OP tools and technologies. Is your team relying on basic tools like spreadsheets and homegrown software? Consider the limitations they pose, for example in terms of alignment, collaboration and network visibility.
- Embrace Advanced S&OP Software: Recognize the need to move beyond foundational tools and embrace advanced technologies. Look for S&OP solutions that enable your team to develop what-if scenarios, assess capacity and inventory across functions, and coordinate expectations with financial plans.
- Integrate Demand and Supply Data: Ensure that the selected technology allows seamless integration of demand and supply data. This integration is crucial for making informed decisions, aligning production with market demand, and optimizing inventory levels.
- Collaborate on a Shared "Single Version of the Truth": Leverage technology to facilitate collaboration on a shared "single version of the truth." This ensures that all stakeholders are working with accurate and up-to-date information, leading to better decision-making and alignment with critical business goals.
- Foster Alignment Across the Network: Adopt a network model and align with external partners, fostering collaboration and information exchange. This shift enhances the flexibility and responsiveness of your supply chain.
- Plan Across Multiple Time Horizons: Expand your planning horizon beyond short-term goals. Advanced S&OP software helps teams consider planning across multiple time horizons to address both immediate operational needs and long-term strategic objectives to help in balancing growth and service.
- Let Long-Term Strategy Drive Decision-Making: Ensure that long-term strategy guides your operational decision-making. Align your S&OP process with the overall business strategy, fostering innovation and adaptability in response to changing market dynamics.
Our Pathways to Evolve provides comprehensive guides to support your supply chain maturity and digital transformation journey. These resources – thoughtfully designed in collaboration with seasoned supply chain experts – will help you identify gaps in your strategy and guide you in determining the next steps, tailored to the pace that aligns with your organizational needs.
Explore our S&OP / IBP Pathways to Evolve with insightful blogs, infographics, and inspiring eBooks to help set your organization on the right foot to transformational outcomes.
What are Some Examples of S&OP Best Practices?
At John Galt Solutions, we have worked closely with customers across industries to enhance their S&OP / SIOP / IBP process, guiding them in the evolution of their digital supply chain strategies. One example involves a prominent manufacturer specializing in medical pet products. This company consistently grappled with challenges in updating active ingredients to maintain efficacy, ensuring a strong market presence and competitive edge.
To address the imperative of balancing supply and demand for new product launches and managing long-tail products, the manufacturer needed a sophisticated approach. With a complex go-to-market strategy involving more than 100 products, considerations such as royalties, payment discounts, freight rates, and commissions demanded meticulous financial modeling.
By adopting John Galt Solutions’ Atlas S&OP, the supply chain team successfully transitioned from a total SKU forecast focus to a more granular channel- and customer-level perspective. This transformation empowered the team to conduct comprehensive volume, inventory, and margin analyses by brand, channel, and customer. Notably, Atlas automatically identifies gaps in the plan, enabling agile adjustments for improved overall performance. This collaborative effort exemplifies how, at John Galt Solutions, we partner with organizations to elevate their S&OP processes, driving efficiency and ensuring success in a competitive market landscape.
In another example, we worked with Tyndale, one of the largest flame resistant (FR) clothing suppliers in the US, and helped its team develop standard processes across the business units and accelerate more mature and robust planning processes to move the business forward. The company adopted the Atlas Planning Platform to support continued growth, and business expansion, enabling the improvement of forecasts and planning.
The S&OP process at Tyndale is now results-driven, and the team is reaping the benefits of data analysis for actionable insights that drive better outcomes. Tyndale accelerated its digital supply chain transformation to support year-on-year growth. Atlas provides the team with a single platform to support new product introductions, standardize planning processes and grasp new commercial opportunities for continued success.
How Can S&OP Software Help Accelerate Digital Supply Chain Transformation?
Sales and Operations Planning (S&OP) is a dynamic process that requires continuous evolution to address the challenges of today's business landscape. To effectively navigate these challenges, organizations need to find better ways to synchronize demand and supply, make strategic tradeoff decisions, and align actions with business strategy and financial goals. This is where advanced S&OP software solutions can make a significant impact, helping companies digitally transform to improve and evolve their processes.
Advanced S&OP software accelerates digital supply chain transformation by providing integration, visibility, analytics, and collaboration across the business as well as with external partners. You are able to plan, conduct what-if analysis and more across multiple time horizons incorporating financial considerations throughout the entire plan while breaking down silos within the organization. This enables organizations to operate more efficiently, quickly respond to changes, and proactively address challenges in the ever-evolving business landscape.
A key aspect of evolving S&OP is fostering extensive collaboration across functions and roles across the value chain. By bringing together various departments such as sales, operations, finance, and other relevant functions, companies can leverage diverse perspectives and expertise to enhance the planning process. This collaborative approach facilitates the identification and reduction of risks while maximizing business opportunities. It enables the organization to set financial targets and align planning decisions with the overarching business strategy.
Here are several ways in which advanced S&OP software contributes to digital transformation:
- Enhance Cross-Functional Collaboration: Advanced S&OP software solutions help companies improve communication and collaboration among departments or functions involved in S&OP, such as sales, operations, marketing, finance, and production. Encourage joint planning sessions, facilitates information sharing, and fosters a culture of teamwork. Cross-functional collaboration ensures that plans consider various perspectives, align with business objectives, and result in better decisions.
- Establish strong data support: A robust data infrastructure and analytics capabilities support S&OP to ensure accurate and timely data collection, integration, and analysis from various sources within the organization and across the extended end-to-end supply chain network.
- Foster alignment across the multi-enterprise supply chain: It’s critical to create alignment and collaborate with external partners, such as suppliers, distributors, and customers. Share relevant data and information to achieve a comprehensive view of the supply chain ecosystem, and aim to work together to synchronize plans, forecast demand, and manage inventory levels effectively to drive mutual success.
- Enhance visibility: Focus on improving visibility across the end-to-end supply chain by leveraging advanced supply chain management software that enables real-time monitoring of inventory levels, production status, and demand fluctuations. Access to accurate and up-to-date information enables proactive decision-making and rapid response to changes in the business environment.
- Work towards agile orchestration: Embrace agility principles and practices for the ability to quickly adapt to changing market conditions. Agile methodologies such as short-term planning cycles help companies orchestrate the network and create a more flexible and responsive S&OP process to support better decision-making in line with business goals.
- Connect planning, execution, and finance: Integrate planning, execution, and finance into a cohesive strategy to help you align financial objectives with operational plans, and ensure that constraints and key considerations are factored into the decision-making process.
It’s important to assess the maturity of your S&OP or Integrated Business Planning (IBP) environment, and identify the steps you can take to evolve. For more information to identify gaps and opportunities, and develop your S&OP process with advanced capabilities, read our white paper: Leveling Up S&OP for a Well-Orchestrated Supply Chain.