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

Jovy Jader // Articles


May 26, 2020  

Are supply chain planning processes still relevant in the new normal of community quarantines, lockdowns and work-from-home employment? Is Sales & Operations Planning (S&OP) obsolete or dead?

Wikipedia defines Sales & Operations Planning as an “integrated business management process through which the executive/leadership team continually achieves focus, alignment and synchronization among all functions of the organization. The S&OP process includes an updated forecast that leads to a sales plan, production plan, inventory plan, customer lead time (backlog) plan, new product development plan, strategic initiative plan and resulting financial plan.”

S&OP balances supply and demand in the medium-term. It links the strategies, goals and objectives of the organization to the detailed executional planning and scheduling process. S&OP is normally done monthly and has proven to be effective in most organizations.

The question then is – is S&OP still relevant today as global supply chains experienced unreliability coupled with unprecedented volatility in consumer demand?

I think yes, it still is. S&OP is more than ever important, especially with all the uncertainties in supply and demand. I believe, however, that the assumptions which underlie S&OP are no longer applicable to the current business environment and that there is need for fundamental change in how we plan for demand and supply.

Demand has become distorted as forward-buying behavior and brand switching by consumers have muddled product offtakes to the extent organizations are unsure of the data as semblance of demand history. Traditional sales channels aren’t any more worthy sources of demand indicators as consumers opt for alternate avenues such as e-commerce and direct selling.

On the supply side, manufacturing and logistics efficiencies have become unreliable as:

  • Variable shipping schedules and swings in basic material availabilities have caused constraints to factory operations
  • Health and safety risks have become prominent priorities as organizations focus on social distancing and personnel protection
  • Pre-pandemic inventory policies have quickly become outmoded in the post-pandemic era

Companies should more than ever rely on the S&OP process rather than see it as dead. What should change are the following:

  • S&OP should be more frequent such as weekly planning instead of monthly planning
  • Organizations must quickly capture and communicate demand and supply data for the benefit of decision-makers
  • Potential misses, whether it be delayed deliveries from suppliers or manufacturing capacity shortfalls, should be quickly incorporated in the S&OP process

This is easier said than done, but organizations aren’t giving up. Most companies are reviewing their short-term to medium-term plans with greater frequency. They’re likely to get back on track to integrate latest demand and supply data into their S&OP.

S&OP is not dead. But organizations that fail to plan will be.

About the Author

Mr. Jovy Jader is a Management Consultant and Regional Speaker on Supply Chain Management. He has directed and implemented Supply Chain Management projects both local and international which have resulted to company-wide improvements in revenue, working capital, total cost, and service levels. Mr. Jader was formerly with Procter & Gamble Philippines and Coopers & Lybrand/PricewaterhouseCoopers.

Jovy Jader