Sales and Operations Planning (S & OP)
Notably the process begins with Sales and Marketing, looking at historical sales, analyzing current market trends, and then compiling what they believe to be the forecasted demand. The emphasis here is on monitoring the dynamic changes in the markets and industry, and then taking actions when necessary to revise the company’s business plan.
Likewise, senior management reviews the Sales and Marketing plan and, based on feasibility and any adjustments, approves the forecast.
This is more easily visualized by the diagram below. 1
This approved plan now is communicated to Operations, i.e., Manufacturing, Engineering and Finance. It is now up to these departments to determine what resources are needed to meet the revised business plan.
However, there may be times when the Sales and Marketing plan cannot be met (due to resource and time constraints) even if approved by senior management. This information is communicated back to Sales and Marketing and the plan may have to be adjusted.In this way the company goes about developing and adjusting its business plan to meet the changing demands of the market place.
The bottom line being that the Sales and Operations Planning process allows for the revision of strategic plans regularly. A key element here is the proactive nature of this process. By creating a ‘realistic’ plan, ahead of time, it forces the departments to communicate and allows the company the opportunity to adjust resources accordingly to meet the revised market demand.
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1 Introduction to Materials Management, fifth edition, JR Tony Arnold, Stephen N Chapman, 2004, Pearson Education, Inc.