Chapter 4: Sales and Operations Planning

Overview

A firm s sales and operations planning (S&OP) process starts with the definition of all demands for the firm s goods and services. It formulates game plans that drive supply chain activities to meet those demands. Hence, an effective S&OP game plan requires consideration of both demands and supplies . The nature of each product s game plan depends on the environment. The game plan may focus on stocked end-items in distribution and make-to-stock manufacturing environments. The game plan for a make-to-order manufactured product depends on the level of stocked components and the need for direct linkage between production orders and sales orders. The game plan for a multisite environment may require consideration of inventory replenishment across a distribution network. Variations in production capabilities such as lean manufacturing also affect the game plan. The saleable products for many firms represent a mixture of environments.

Independent demands provide the logical starting point for formulating an S&OP game plan. The logic underlying planning calculations and demand-pull philosophies is built on chasing demands. Independent demands consist of sales orders or forecasts or a combination of both.

Since the nature of an item s S&OP game plan depends on the environment, several common scenarios are used to illustrate considerations about demand and how to formulate a game plan. The scenarios included here represent single-site environments involved in distribution and manufacturing; Chapter 9 provides additional scenarios involving multisite operations.

An effective S&OP game plan results in fewer stock-outs, shorter delivery lead-times, higher on-time shipping percentages, a manageable amount of expediting, and improved customer service. Several guidelines are suggested to improve a firm s sales and operations planning process and the effectiveness of each product s game plan.