Sales and operations planning (S&OP)
Sales and operations planning (S&OP) is the monthly cross-functional process that balances projected demand against supply capability and commits the business to one operating plan. Sales, operations, finance, and procurement reconcile the demand forecast, production and capacity plans, inventory targets, and the financial plan, ending in an executive meeting where trade-offs are decided and the plan is signed off.
Examples
Closing a demand-supply gap: The June cycle shows consensus demand of 9,000 units for Q4 against a supply plan capped at 7,800 because a casting supplier is fully booked. Pre-meeting work prices three options: $240,000 of overtime and weekend shifts, a 1,200-unit inventory build in Q3, or putting smaller accounts on allocation. The executive meeting approves the Q3 build.
Pulling inventory back to target: Finance flags finished goods creeping from 38 to 55 days of supply. The supply review traces it to a forecast that ran 15% high for two quarters. The plan cuts Q1 production by 6,000 units, accepting lower plant utilization to bring inventory back in line.
Definition
The classic cycle runs monthly through five steps: data gathering, demand review, supply review, pre-meeting reconciliation, and the executive S&OP meeting. Demand planning turns statistical forecasts and market input into a consensus number; the supply review tests that number against capacity and material constraints; reconciliation prices the gaps and frames the decisions leadership has to make.
The output is one plan, typically at product-family level across an 18 to 24 month horizon, that sets inventory targets and drives the master production schedule. Done well, it is the only place where demand, supply, and money are forced into the same room and the same units.
The difference between S&OP that works and S&OP that is theater shows up in the executive meeting. If the meeting reviews dashboards and adjourns, it is a reporting ritual. If it decides things (approve overtime, build ahead of a seasonal peak, put a product on allocation), it is running the business. Mature implementations fold in full financial planning and often get rebranded as integrated business planning (IBP); the label matters less than whether one agreed plan actually governs demand, supply, and budget.
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