S&OP Process Principles
Principles of Executive S&OP*
Tom Wallace and Bob Stahl
Click here to download a PDF file of these principles
- Executive S&OP requires the hands-on participation of executive management, up to and including the leader of the business (president, COO, CEO, general manager, managing director, etc.).
- Executive S&OP is a decision-making process that balances demand and supply at the aggregate level, aligns operational planning with financial planning, links strategic planning with day-to-day sales and operational activities, and sets the tactical direction of the business.
- The Executive S&OP planning cycle is monthly, with provisions for mid-period revisions when major changes occur.
- Executive S&OP is an aggregate planning tool. It focuses on aggregate volumes, and only rarely looks at issues of mix, i.e. individual products, stock keeping units, customer orders and so on.
- The volume plans authorized in Executive S&OP direct the plans and schedules for mix. Therefore, tight alignment between volume plans and mix plans is essential out to a point called the Planning Time Fence, inside of which individual product requirements must be known.
- Executive S&OP must function in multiple units of measure – to support demand, supply, finance, logistics, and so forth. There must be tight alignment between the operating plans and the financial plans through appropriate unit of measure conversions into currency.
- Executive S&OP is cross-functional and collaborative. It involves, at a minimum, Sales/Marketing, Operations/Supply Chain, Product Development, Finance, and General Management.
- Executive S&OP by its nature will trigger disagreement between various parts of the business, and thus an organization must learn how to openly welcome and resolve these differences.
- S&OP puts a spotlight on accountability. The sales plans and operations plans in Executive S&OP represent commitments by Sales/Marketing and by Operations/Supply Chain respectively to achieve those plans.
- Product groupings (families) in Executive S&OP should be based on how the marketplace views the company’s products. Other processes exist within S&OP to convert those market-facing families into meaningful groupings for Operations and Supply Chain.
* Executive S&OP is the term given to the higher-level, volume planning section of the overall set of Sales & Operations Planning processes.