Sales And Operations Planning - The Fundamentals For Success

Many companies are currently struggling to digitalize their Sales & Operations Planning (S&OP). While digital tools are undoubtedly the future of S&OP, not all companies currently upgrading their S&OP processes are likely to see major improvements because of digitalization. In our experience, going digital may lead to disappointing results if the fundamentals are not robust. It is not a “silver bullet” that could somehow magically fix existing issues, but a powerful enhancement that must work hand in hand with a strong S&OP process.

Sales and Operations Planning (S&OP) is a powerful approach that seeks to synchronize demand, capacity, and inventory. When implemented well, S&OP is an efficient process that ensures cost and inventory optimizations while improving service levels. If done successfully, it is the backbone of a company’s operations and an essential contributor to efficient sales.

In a wide range of businesses, S&OP has successfully fostered collaboration between various functions, in particular supply chain, production, purchasing, sales and marketing, as well as finance and control. It enables the integration of the many separate plans into a single shared and consistent process that can meet evolving business priorities.

Unfortunately, S&OP has often failed to live up to its promise. According to research, around 50-70 percent of businesses have been struggling to reap its full benefit. A poorly implemented S&OP process can trigger a vicious cycle in which existing failings in the process are exacerbated over time, leading to a further deterioration of key S&OP performance indicators.

Unfortunately, S&OP has often failed to live up to its promise. According to research, around 50-70 percent of businesses have been struggling to reap its full benefit

EXHIBIT 1: Four trends ensure S&OP’s increasing importance

^{Source: Oliver Wyman analysis}

This should not suggest that S&OP is a failure. When done well, it produces major process improvements. The trouble is in the implementation. So, where does digital S&OP fit in? Can it fix the current issues? Digital S&OP promises much by automating workflows and improving decision making. But can it deliver what it promises?

In this paper we look at four major trends which could help determine how to get it right. Predicting supply and demand is a complex balancing act, therefore we examine the following: