Sales and operations planning (S&OP): A project manager’s guide

Have you been struggling to align teams at your organization? It’s a problem many project managers face. Thankfully, there’s a solution. 

Sales and operations planning is a six-step business process where a leadership team achieves focus and alignment in all areas of an organization. This involves aligning everything from the supply chain to product demand and adjusting needs where necessary. While it might sound tough, you can improve organizational clarity and alignment with this step-by-step guide. 

In this article, we’ll go over everything from the process steps to the business impact of putting an S&OP process in place and provide you with project plan templates to get started. 

What is sales and operations planning (S&OP)?

Sales and operations planning is an essential process that aligns operational plans with strategic business goals. It entails working together across different departments to balance supply and demand, improve business performance, and increase customer satisfaction.

Accurate demand forecasting, coordination of inventory levels, production capacity, and resource allocation are essential for this process. Such coordination fosters efficient operations that align with the overarching business objectives. Maintaining operational efficiency requires adapting plans based on market trends.

S&OP example

Consider a consumer electronics company that uses S&OP to prepare for an anticipated surge in customer demand for its latest product. By incorporating simulations and analyses into its demand forecast, the company can align its procurement schedules, manufacturing plans, and logistics strategies accordingly. Advanced analytics and dashboards provide real-time visibility, enabling adjustments to be made proactively to avoid supply chain disruptions. As a result, when the surge occurs, the company has the necessary working capital to meet the surge without falling into the pitfalls of overstocking or inventory shortages.

This example highlights how S&OP helps businesses make informed decisions and respond flexibly to market demands to safeguard customer satisfaction while optimizing inventory management.

Sales and operations planning process

Are you optimizing your S&OP process to its full potential? S&OP unfolds through a series of steps, typically observed in monthly meetings. Although the exact terminology and sequence might differ from one organization to another, they invariably share certain indispensable elements.

1. Forecasting

The first step in the sales and operations planning process is forecasting, which involves gathering the data needed to properly forecast future sales. The types of data gathered will depend on your line of focus but might include internal factors—such as current processes, cash flow, and inventory—as well as external factors—such as industry trends and competition.

These initial forecasts will help you properly plan and execute your S&OP and ensure that your data is recent and accurate. Along with internal and external forecasting, there are a few different types of forecasting methods you can use. These include lead analysis, opportunity stage, and intuition planning. 

The type of forecasting method you use is up to you and may require some trial and error to find the right match. Whichever one you use, aim to collect enough data to move onto step two, which involves adjusting product demand based on forecasting findings.

Lead analysis forecasting

Lead analysis forecasting focuses on building relationships with your customers and analyzing lead sources to convert qualified traffic into sales. By assigning values to different leads, you’ll be able to better predict revenue generation and sales forecasting. 

A sales pipeline template, like the one pictured below, is a simple workflow to help you document, track progress, and prioritize leads. You can then analyze past pipelines to forecast future sales.

This method involves analyzing:

• The number of leads acquired

• The conversion rate of acquired leads

• The revenue generated per lead

• The medium by which the leads were acquired

Analyzing this data from recent months or even years can help your team properly estimate which numbers to include in your S&OP.

Opportunity stage forecasting

Opportunity stage forecasting involves breaking each sales pipeline into smaller stages. A sales pipeline is a summary of upcoming sale opportunities. By reviewing sales opportunities, you can create a manageable plan and a clear strategy for each step of the customer lifecycle.

A sales pipeline can help you anticipate revenue and cash flow, discover resource gaps, and identify skill shortages. To do this, separate your pipeline into eight different stages:

• Prospecting: In this stage, narrow down the potential company or contact and begin communicating with the prospect. This is usually achieved with an initial meeting.

• Demonstration: In the second stage, use your meeting to give an elevator pitch and product demonstration to your prospect. 

• Investigation: During the investigation stage, take the information you learned from your demonstration and determine if your product or service is the right fit for your prospective customer.

• Trial: Once you’ve determined that it is the right fit, your customer tests your product to see if it solves their problem. 

• Proposal: After the customer determines that they want to use your product, send them a proposal with additional details, including the price of the partnership.

• Roadblocks: Once your product is implemented within the customer’s business, work together to solve any initial roadblocks. A roadblock could be an issue with the contract or product.

• Negotiations: After solving the roadblocks, make any last-minute changes to the proposal before closing the sale with any necessary legal paperwork. 

• Closed win/loss: A successful negotiation results in a closed win, where the proposal has been signed and accepted. If the proposal is rejected, it is considered a closed loss.

Once each pipeline is broken down into the above stages, sales teams analyze the data to predict future outcomes.

Intuitive forecasting

Intuitive sales forecasting relies on verbal data given by sales reps. To use this forecasting method, communicate with the sales team about new leads in the pipeline, anticipate revenue from said leads, and configure the likelihood of the deal being closed. 

While more subjective than the other two methods, intuitive forecasting is a good fit for teams looking for a quick and general forecast rather than a precise and accurate forecast. It’s also a good choice if your organization doesn’t have historical data to analyze. 

2. Demand planning

The next step in the planning process is adjusting your demand according to the forecast you gathered in the previous step. Analyze your forecasts based on internal and external factors, and make adjustments to inventory numbers as needed. Then, use that information to create a project schedule. 

There are three parts to a successful demand planning process, including: 

• Trade promotion

• Product portfolio management

• Statistical analysis 

Advanced inventory management software often includes features that support these aspects of demand planning, offering tools for promotional impact analysis, product lifecycle management, and sophisticated statistical modeling.

You may also choose to perform demand shaping in this stage, which is where you implement tactics such as price incentives and cost modifications to meet your demand goals. While helpful, it’s not always required.

Trade promotion management

Trade promotion management is the planning and processing of trade spend, sometimes with the help of software tools. Trade promotion is used during demand planning to implement special product pricing, which then increases demand for said products.

Trade promotion includes a variety of activities, including:

• Discounts: Some of the most common promotions companies use are discounts. This is when one or many products are sold at a lower price to incentivize sales. 

• Bundles: A bundle promotion is when a variety of product families are sold together, sometimes at a discounted price, instead of individually. Not only does this incentivize purchasing multiple products, but it’s also a great way to show how your products work together. 

• Rebates: A rebate is an after-purchase product discount. Since they require consumers to claim or send their offer in some way, they have a lower completion rate, ranging between 5 and 80%. 

• Contests: Another form of promotion is through contests. A contest campaign involves offering a prize for purchasing, such as a free product or cash offer.

• In-store promotions: Improving your retail merchandising strategy can improve trade promotions by encouraging impulse purchases and highlighting promotional offers.

Trade promotion is heavily intertwined with marketing, but whereas marketing can focus on a variety of different performance metrics, trade promotion focuses solely on driving direct sales. Implementing these tactics can help increase demand for your product and, in turn, drive sales.

Product portfolio management

Product portfolio management can help you manage all aspects of the products your company sells, otherwise known as your product portfolio. These aspects can include anything from evaluating performance to prioritizing product value.

Product portfolio management may also include:

• Product alignment: Aligning products based on offering, branding, uniqueness, and price to create a cohesive product portfolio. 

• Product analysis: Analyzing products based on their position in the market and the impact they have to help grow your portfolio.  

• Low profitability elimination: Eliminating less profitable products to keep your portfolio performing well and help bring in steady value growth. 

• Resource allocation: Allocating and scheduling resources for product development to meet market demand.

Portfolio managers lead these aspects of your product roadmap and ensure the team has the right tools to create efficiency.  

Statistical analysis

Statistical analysis is the collection and interpretation of data to identify patterns and trends. This involves using data analytics to spot needed changes to product demand. 

Statistical analysis includes the following steps:

• Identify the nature of the data

• Explore the relation of the data to market trends

• Summarize how the data relates to market trends

• Prove, or disprove, the validity of the relationship

These steps help build a comprehensive understanding of product data such as demand, price, and market demand. This can help clarify your strategic plan and ensure your demand planning is backed up by data.

3. Supply planning

Addressing supply chain disruptions requires cross-team collaboration in the planning phase, with finance, operations, and product leaders working together to adjust their supply chain needs. 

This step is based on the previous inventory adjustments and aims to determine whether there are constraints associated with people, suppliers, machinery, or technology. After analyzing those factors, the team can create a supply plan that outlines what changes need to be made. 

If you only need to make simple changes, organize your supply plan similar to a business case. Otherwise, schedule recurring meetings with supply stakeholders for team alignment. You might also want to implement additional measures, including unifying supply chain and enterprise planning, anticipating the end customer, and leveraging data.

Unify supply chain and enterprise planning

While supply planning involves adjusting supply and demand needs, enterprise planning involves managing the strategic and operational goals of product supply. 

Unifying both the goals and the needs of your supply chain ensures all areas, from executive to consumer, are aligned and forecasted for the same outcome. 

Anticipate demand

You may begin anticipating supply and demand during the initial forecasting phase of your S&OP based on internal data. But during the supply phase, you will anticipate demand based on the end consumer.

You can do this by reviewing internal data from your demand forecasts and external data that you’ve gathered on your customers. This information is typically obtained through data gathering activities that track customer patterns, such as shopping behaviors, frequented competitors, and target market research.

Leverage real-time data

Using real-time data in your supply planning phase can ensure that the data you collected in the initial phases is being leveraged appropriately across all areas of your supply chain. 

This task can be performed manually or enhanced with AI tools, such as business process automation, that apply advanced analytics and dashboards to automate data gathering and ensure information is correctly assigned to consumer profiles.

Collecting this data can help you adjust supply chain processes to enhance efficiency and make the necessary inventory adjustments. 

4. Pre-S&OP meeting

Once the forecasting and product plans have been made, it’s time to begin the implementation process with an initial kickoff meeting. This is a chance for department heads from the previous phase—as well as human resources, marketing, sales, and any other teams that may be affected—to meet to discuss the changes. 

A meeting agenda template can help you prepare for your meeting and ensure you cover the important topic points the first time around.

Some questions to discuss during this meeting include:

• What are the financial implications of these changes?

• How will they affect cash flow?

• Will this help prevent business uncertainty?

The purpose of this meeting is to consider the financial and customer-facing implications of the supply changes. Since no one person will be able to speak to each of these considerations, it’s important to bring each leader in to speak to their unique knowledge.

5. Executive S&OP meeting

Once the initial meeting has taken place and the implications have been identified and resolved, it’s time for the executive meeting. The purpose of this meeting is to get the executive team's approval for the previous supply change plans, also known as your aggregate S&OP plan. 

Since you’ve already had an initial meeting, it should be easy to supply the executives with the necessary information. Consider sending out a meeting brief the day before about what you plan to discuss. 

If the proposal gets rejected, you’ll need to make revisions to the initial project plan. If it gets approved, you can move on to implementing your S&OP. 

6. S&OP finalization

In order to finalize and ultimately implement your S&OP process, you should delegate tasks to the appropriate project stakeholder. In addition, store information in a shared space to create team visibility and give access to resources in real time.

Once tasks have been completed and the S&OP has ultimately been implemented, keep a close eye on changes to your supply-and-demand system. This is especially important as it pertains to cash flow and ensuring your business is safe from financial mishaps. 

You can do so by reviewing KPI metrics such as:

• Demand and production forecast

• Inventory turnover

• Capacity utilization

• On-time delivery

• Accuracy in order delivery

• Total sales 

• Gross margin

• Cash flow

Keeping an eye on these changes can help correct any issues in real time before they have negative effects on profitability.

Sales and operations planning benefits and impact

Implementing a sales and operations plan can have a positive impact on a number of different aspects of your organization. From streamlining value to cross-functional collaboration and teamwork, S&OP can improve your overall sales strategy. Let’s look at some of the benefits and the impact they can have on your team.

Streamline value focus

By bringing the executive team together frequently to analyze business alignment, an S&OP plan creates a cohesive value focus for each department. 

Not only is this important in order to create organizational clarity from the top down, but it also makes problem-solving and tough decision-making easier to solve. This is because everyone has clear expectations of where the value lies and what steps are needed to get there. 

Team impact: Drives value for your internal team and your external customers, as well as helps you create a cohesive business plan backed by data.

Increase supply chain visibility

In large organizations, it can be challenging to create supply chain visibility with various teams working in their own silos. With an S&OP, the department leaders have more visibility into the supply chain management plan. As a result, they can choose to continue this visibility to lower-level team members. 

The benefit of supply visibility is that it allows various departments to make decisions based on the organizational demand plan. 

Team impact: Leads to a more streamlined production plan and delivery rate, which supports customer satisfaction and improves sales.

Improve cross-functional collaboration

Another key benefit of an S&OP plan is improved collaboration between teams, departments, and leaders. This is a direct result of the recurring teamwork between leaders to align all aspects of the business. 

Cross-functional collaboration can create a more cohesive dynamic between business units and help foster a more enjoyable team-centric environment. 

Team impact: Improves cross-departmental communication and efficiency, which means fewer missed deadlines and a quicker product lifecycle.

How to choose sales and operations software

In order to get started with a sales and operations planning solution of your own, it can be helpful to use software tools that can streamline and automate tasks for you. In addition, they coordinate information in one place, making it accessible in real time, no matter where your team is located. Use a sales planning template to track and manage tasks in one place. By sharing this template with stakeholders, you can also organize plans and keep project objectives clear across multiple teams.

Along with implementing sales and operations planning software, it’s helpful to integrate other aspects of supply chain planning, such as inventory planning, demand planning, and supply planning, in order to create the most effective plan possible. 

Here are some solutions based on select needs that you can implement to create a more robust S&OP process:

For large teams

For large businesses that are looking to scale their sales and operations processes, it’s important to reduce waste and automate as many tasks as possible. This will create a more efficient process and give more time back to those who need it. 

Here are some software features to consider when looking to scale a large business:

• Automation: Business process automation can save your team time by eliminating the busywork and creating more efficiency throughout your organization. 

• Risk management: In order to reduce project waste, you need to prevent risks from happening in the first place. A risk register can help to track these issues in real time.

• Advanced analytics: Evaluating analytics before, during, and after projects can help your team make continuous improvements. 

While these aren’t the only features an S&OP tool offers, it’s important to check these boxes in order to properly plan for business growth. 

For supply chain needs

Supply chain management has multiple moving parts, which is why implementing software can help streamline and improve your current product development processes. 

Some software features that can help teams hedge against supply chain disruptions are:

• Product planning: The right tool can make launching a new product a breeze by providing a way to plan and communicate with team members. It can also help with the inventory management process by tracking your team’s progress along the way to ensure deadlines are met.

• Forecasting: Forecast accuracy is essential when creating an efficient supply chain. Not only for internal purposes but even more so for customer-facing needs to prevent poor experience on their end. The right tool will help by providing digestible data in visual spreadsheets. 

• Production: Production needs consist of everything from a sales plan to product sourcing and lead times. S&OP software can help organize these tasks and ensure team members are notified when production dependencies are met. 

The bottom line? The right tool can help your supply chain meet your bottom dollar. 

For collaboration capabilities

If there’s one thing that sets teams up for success, it’s collaboration. Empowering your team to work together can help create transparency and accountability.

Here are some features the right software tool can offer:

• Aligned communication: The right tool should host communication in one central dashboard, making it easy for teams to connect about projects, tasks, and tactical plans. 

• Assigned tasks: Assigning team members to tasks can create accountability and can also organize dependencies to ensure work doesn’t fall through the cracks. 

• Aligned work and goals: Connecting work to project goals can keep team members on the same page and help keep OKRs top of mind. 

• Automated task reminders: With collaboration software, you can automate reminders and ensure they get to the right stakeholders without unnecessary manual work. 

While collaboration can help with many business areas, it’s especially important when looking to create a robust S&OP plan that helps align multiple teams within your organization. 

S&OP best practices

Effective sales and operations planning is essential for managing the intricacies of market demands and supply chain obstacles. One common problem that S&OP can solve is the misalignment between various departments that leads to inefficiencies, stock discrepancies, and missed opportunities.

By adopting best practices in sales and operations planning, organizations can synchronize cross-functional efforts and ensure a cohesive approach to meeting market demands and achieving business goals.

Are you leveraging the latest data?

How recent are the data inputs fueling your strategy? Effective sales and operations planning hinges on using real-time inputs for all planning activities. This involves rigorous data gathering and the application of advanced analytics to uncover insights that inform your actions. Ensuring your data is up-to-date allows for agile responses to market changes and more accurate forecasting.

Have you tested your strategies with simulations?

How resilient are your financial plans? Simulations offer a powerful tool for stress-testing your strategies against various market scenarios. By incorporating decision-making trials that factor in budget constraints and working capital, you can identify the most productive strategies for resource allocation, risk mitigation, and seizing growth opportunities.

Who owns your S&OP process?

Is there a clear leader steering your S&OP efforts? Identifying an internal owner for your sales and operations planning process is critical for ensuring focus and accountability. This person should have a thorough understanding of your business goals and the ability to coordinate across departments. Assigning this responsibility ensures that strategies are executed cohesively and aligned with overall business objectives.

Align your team with an S&OP

Implementing a sales and operations planning process to keep your teams and ultimately your entire organization aligned. From streamlining your value focus to improving cross-departmental collaboration, use an S&OP to take your business to new levels. 

Pair an S&OP plan with work management software to reduce busywork and improve overall efficiency. Ready to make the move? Check out how Asana can help you implement an S&OP process of your own.