Sales and operations planning is having a consensus-based and unified business plan that helps an organization control inventory, as well as improve service levels. When coming up with the process, it’s necessary to consider who is going to be responsible for each step of the plan. You also want to have expectations for meetings, hand-offs, and how you communicate changes. Effective planning depends on the input.
Key Benefits of Sales and Operations Planning
With sales and operations planning, you can have increased transparency between departments. This allows you to make better decisions about a product’s supply and demand. You can have improved inventory management, along with better budget forecasting and sales. You also gain a clearer understanding of a product’s lifecycle and the management process. You can further improve your business with a streamlined process that improves the overall customer experience.
Roles for Sales and Operations Planning
There are different roles involved in the planning process, and each one has its own set of responsibilities.
Executive Management: This role chairs the meeting and is the ultimate decision-maker. He or she holds the organization accountable to the plan.
Sales and Marketing Leader: This person sets the expectations with the sales team members in charge of performing sales forecasting.
Demand Planner: This role presents the demand plan information in an accurate, timely, and ready-to-use condition, interacts with sales staff to complete data collection, and focuses on issues with any future forecast.
Sales Personnel: The sales personnel are in charge of gathering intelligence, performing sales forecasting, and updating the sales forecast monthly.
Operations Leader: The operations leader sets expectations with material and production teams that will help with working out the supply plan, ensures the aggregate level data is presented and presents the actual vs. forecast performance for inventory.
Steps in the Sales and Operation Planning Process
Step 1: Gather Data
In this first step, you will need data collection on past sales, trends, and assessments of forecast accuracy. Planning software can help you handle many of these tasks using automated data upload processes, as well as built-in reporting. The Demand Leader is usually responsible for this step. There is key information from the sales and marketing team, but input from logistics, finance, and operations/supply should also be considered. Sub-steps include managing new and existing item changes, running analytics, previewing performance measures, and adjusting item-level supply attributes.
Step 2: Demand Planning
This step involves validating forecasting, looking at and understanding sources of demand, accounting for variability, and reviewing customer service policies. It also needs to include one-time events, customer launches, new products, and promotion plans. The Demand Planner is responsible for developing this, but the marketing and sales teams need to be consulted for verification and input as well. There are many different sub-steps. The first is to create the report then share reports for input, edit plans as necessary, and review and finalize the demand plan.
Step 3: Supply Planning
Supply planning involves interpreting the demand plan into an appropriate supply plan. This means teams need to determine inventory targets, safety stock levels, and the production methods for demand chase. It also means looking at the ability to meet demand by managing inventory, operations scheduling, and available capacity. The Head of Supply is responsible for the supply plan. However, finance, logistics, operations, and manufacturing should also be consulted for input.
Step 4: Reconciliation of the Plans
This step happens during the monthly meeting. You need to sort through the supply side issues in order to figure out if the sales plan can be used and your objectives can be met. Additional tasks include reviewing the performance from the last month and presenting the forecast. The Supply and Operations Planning Leader is responsible for this meeting and its execution.
Step 5: Approve and Release Plan
Once the plans are recognized and finalized, the result is presented to the executive team during a monthly meeting. The object of this meeting is to get an approved plan that can then be executed by operations. The leader oversees this meeting but the executive sponsor is a required participant and needs to finalize all the outcomes and decisions of the meeting.
Metrics for Sales and Operations Planning
When you are looking at the process, there are different metrics you can use to understand performance.
Demand and Supply Metrics: These metrics help you know if your forecast is accurate. This includes on-time delivery, accuracy in-order delivery, cycle times, production forecast versus the actual, and demand forecast versus the actual.
Financial Metrics: Financial metrics show you how your business is performing. These metrics include total sales during a certain period, total sales versus the forecast, working capital versus the plan, and gross margin.
In order to make the whole process easier, and instead of relying on spreadsheets, there are different tools you can use to help your business achieve its planning goals.
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