S&OP (Sales and Operations Planning)

S&OP (Sales and Operations Planning) is an integrated planning process in which sales, production, supply chain, finance and management regularly align expected demand, available capacity and financial targets. The result is a realistic, coordinated overall plan that achieves revenue and service goals without overloading production and supply chain or building unnecessary inventory.

Why S&OP Is Necessary

S&OP addresses a structural tension: sales wants availability and flexibility, production needs stable plans, supply chain wants inventory and delivery risk under control, finance targets contribution margins and cash. Without an integrated planning process each function optimizes locally – with suboptimal overall results: shortages, excess inventory, firefighting and missed delivery dates.

The Typical S&OP Cycle

Most companies run a monthly cycle with four steps. In the Demand Review, forecasts from sales and marketing are consolidated into a demand plan. In the Supply Review, feasibility is assessed: capacities, shifts, lead times, scenarios. In the Pre-S&OP Meeting, open conflicts between demand and supply views are named and compromise proposals developed. In the Executive S&OP, management decides on the final plan, priorities and risks.

The result is a binding plan with a typical horizon of three to eighteen months that is broken down into detailed scheduling and shift planning.

S&OP vs. IBP vs. Operational Planning

S&OP focuses on volume, product families and capacity frameworks in the medium-term range. IBP (Integrated Business Planning) extends S&OP with financial planning and strategic scenarios. Operational planning translates S&OP into concrete order and shift plans for lines and machines. S&OP is therefore the bridge between strategy and daily production control.

Why Shopfloor Data Is Critical for S&OP

S&OP decisions are only as good as the underlying data. Theoretical machine capacities without real OEE data produce plans that do not work on the shop floor. Incorporating actual availability, cycle times and bottlenecks from the MES into capacity assumptions creates plans that reflect true delivery capability – not PowerPoint-optimized wishful thinking. Integrating shopfloor data from MES into S&OP processes is one of the most effective levers for simultaneously improving planning quality and delivery performance.

FAQ

Is S&OP only relevant for large corporations? No. Mid-sized manufacturers also benefit as soon as product variety, customer-specific requirements and limited capacities converge – which applies to most discrete manufacturing companies.

Do you need special S&OP software? Not necessarily. A clear process, defined roles and clean data are what matter. With growing complexity, specialized planning tools help run scenarios faster – but process must come before software.

How do you start pragmatically? With a monthly cross-functional meeting based on a few well-defined metrics: forecast vs. actual, capacity utilization, delivery performance, inventory. Then deepen iteratively – no big-bang approach.