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Sales and Operations (S&OP) Planning Process

Aug 03, 2023
6 min read
To achieve the ROI you’re hoping for, you need a strong S&OP strategy in place. When your strategy is data-driven and supported by S&OP software, you set yourself up for success. Learn about the key steps and benefits of the sales and operations planning (S&OP) process in this article.

What Is Sales and Operations Planning (S&OP)?

Sales and operations planning is the process of integrating supply, demand, and financial planning into your overall business strategy. It brings together these areas into your master plan to support the C-suite decision-making process, typically on a monthly basis.

By comparing available supply to expected demand, the process can help your teams create plans at both the strategic and tactical levels. You can use your S&OP process to control production capacity, workforce decisions, vendor management, materials requirements, and master scheduling.

The 6 Steps of the S&OP Process

The S&OP process takes you through focused steps that enable you to align your supply and demand metrics with the overall sales goals of your organization. Bringing together the right team is key to the process, which then uses data related to your KPIs to create reports that your executives can use to make and adjust their business decisions. By meeting regularly (typically once a month), your team is well-positioned and has the data they need to tweak your operations and focus on next steps.

1. Assembling Your Team

The first step to building and implementing your S&OP strategy is assembling the right team. S&OP brings together moving parts from your entire organization to create a synchronized plan. In fact, 70% of sales professionals say S&OP is now a key part of their job responsibilities.

Your C-suite should be part of the mix. When they buy into the importance of S&OP planning, they can communicate required specifics and help set goals. Of course, your sales team is also at the heart of the process. Support from your marketing team is key as well, as is the involvement of reps from your customer service, finance, IT, HR, and product teams. Among the specific roles that should be involved with your S&OP planning team are:

  • VP or Director of Sales Operations
  • Sales Operations Managers
  • Analysts
  • Coordinators

The earlier you bring in all of these stakeholders, the more likely you are to create a comprehensive plan that speaks to diverse perspectives and benefits your entire organization.

2. Forecasting and Establishing KPIs

You can choose from thousands of potential KPIs, so it's important to focus on those that are the most critical for your business and industry. Gather the data your team needs to analyze your current state and make decisions about future strategy. Many companies find it useful to look at historical sales performance and forecasts.

Demand-related KPIs, including forecast accuracy and forecast bias, are important, as are supply-related KPIs involving inventory days, on-time delivery, and manufacturing conformance. Other metrics you may find useful include:

  • Total sales
  • Gross margin
  • Inventory turnover
  • Cycle time
  • Market trend analysis
  • Competitive analysis

3. Supply and Demand Planning

Supply and demand planning dictates many aspects of your S&OP process. Operational planning, sales forecasting and overall growth projections all come into play here. Start with demand planning on a regular basis. Your historical sales performance and market analyses can help you forecast demand. From there, your supply-related planning will help you allocate inventory, schedule your supply chain, and plan for production volume.

Evaluating your supply and demand on a regular time frame, such as every month, will prepare you for the decisions you make at your S&OP meetings.

4. Creating Useful Reports

The report that your team creates through the S&OP process can help you understand the impact of your business decisions and streamline your planning for the future. Depending on the specifics of your business, you may want to create analytical and predictive reports about innovation efforts, SKU optimization, products and product families, sales performance, production forecasts, inventory, and upcoming opportunities and risks.

Your reports should make your S&OP process clear, and they should be completed and shared regularly (in most cases, monthly). Use compelling data visualizations and refer to the same KPIs each month so you can easily measure your team's progress.

5. Finalizing and Implementing

As you bring together your sales, marketing, operations, and finance teams, you can work through any remaining supply, demand, inventory, and performance issues to finalize your sales and operations plan. Your executive team can then approve it for implementation.

6. Executive Meeting

Defining how often your team will meet is key to a successful S&OP process. Many S&OP teams meet once a month to run through the process, though you may decide to meet more or less frequently depending on your goals and strategy.

These meetings are a terrific opportunity to bring together leaders from different parts of your company. Focus on next steps, deadlines, and accountability to keep your team moving forward strategically.

4 Benefits of S&OP Planning

As you lean into S&OP, you can boost productivity and see improvements across several functions. Take a look at some of the key benefits of the S&OP process:

1. Elimination of Departmental Silos

S&OP encompasses many key divisions of your organization. Because of this, it encourages transparency and eliminates the communications sludge that can occur when departments become siloed. Your entire company is able to understand each product's life cycle and make smart decisions about supply and demand. Deadlines and requirements become clear to all stakeholders, helping you to complete critical actions in a timely way.

2. Improved Inventory Management

S&OP provides up-to-the-minute information on your inventory so you can make fast adjustments when you face changes in demand or supply. Without this, you can end up wasting resources on unneeded or expired inventory, or you can lose revenue because you're not ready to meet demand. S&OP helps you fulfill orders quickly and accurately from an inventory that contains just what you need to have in stock.

3. Reduced Lead Times

When your supply and demand processes are streamlined through S&OP, the result is happy customers. Customers are always pleased when they get their orders on time. S&OP can help you spot bottlenecks, smooth customer service, and shorten lead times. Because decisions are being made strategically, your response to customers will be consistent and timely.

4. Higher Profitability

The alignment that occurs between sales and operations with S&OP makes itself known on your bottom line. Increased efficiency, reduction in supply chain snags, realistic goals and forecasts, and minimized storage needs all help maximize your profits. Your overall productivity will improve, as will the satisfaction ratings of your customers.

How S&OP Software Can Help

S&OP software is immensely helpful in making your sales and operations plans more efficient and effective. AI-powered data analytics can help uncover insights you wouldn't achieve otherwise. Planning software can streamline workflows through automating various steps in the process. And having a single access point for data helps your team work on the same page, facilitating communication.

According to Accenture, about 75% of organizations are now using AI, and 84% of sales ops professionals have accelerated their use of digital tools since 2019. Companies that incorporate these new tools are more likely to experience high performance. Similarly, LinkedIn's survey of sales ops professionals also reports on the importance of digital tools, including sales intelligence tools.

An up-to-date, optimized tech stack focused on sales is integral in meeting modern business demands. S&OP software is at the heart of this transformation.

What's Next for Sales and Operations Planning?

Staying competitive in an environment that's always changing requires up-to-the-minute tools and data. To stay on your toes, you need tools that carry you beyond your competitors.

Xactly Sales Planning™ software takes your sales and operations planning to the next level. Sales planning, forecast modeling, real-time dynamic dashboards and workflows, AI predictive analytics, and multi-user editing all help you optimize your company's capacity. Your sales ops teams will relish the data-informed insights that our software provides, taking the actions needed to help your organization reach its goals.

Taking a data-driven sales approach to your S&OP process helps you stay nimble and competitive by providing the timely information you need to make smart decisions. When you have the S&OP tools you need, you’re well-positioned to achieve new heights of productivity and profitability. Discover more about how our tools can move you forward today.

  • Sales Performance Management
  • Sales Planning
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Xactly News Team

The Xactly News Team reports on the latest product, events and market trends taking place within Xactly and throughout the revenue intelligence industry.