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Blog post by Charlie Dietz
S&OP is a business process used by many organizations across many different industries, business types, organization sizes and structures (including for-profit and non-profit entities).
At its basic function, the S&OP process allows an organization to regularly review its consumer / customer / client demand, and key organization performance against these forecasts and production / execution plans. It has a tactical / strategic focus, as it generally is looking in time units of your planning cycle (generally monthly, but sometimes weekly (retail) or quarterly or longer (capital equipment)).
The key process of S&OP is the periodic, scheduled mandatory meeting of the stakeholders of the business to review the key business KPIs, at a level of detail appropriate to the business, and agree on forward plans.
A CPG company selling thousands of SKUs would typically present performance measures at a product class or sub-class level. A food processing company having few end items would review performance at the SKU level. A non-profit / association would review key operating variables against plan (membership growth/retention, conference registration, sponsorship sales, fundraising/development revenue, web visits/conversions, etc.).
For many organizations where there are ongoing sales of products that must be made or procured, one helpful tool is the S&OP Waterfall Forecast and Sales KPI display, a stylized version shown here:
For the Product sub-class: Consumer Widgets (imported from China), representing a summation of the Consumer Widgets, the time to plan, make/procure, and have a widget available for sale is 3 months. So in March of this year, our current month, we have a current proposed forecast of 200, 130, 125, 125, 100 units for March through July. We need to understand a few things:
There are also other KPIs that would be more operational (day-to-day, weekly).
Outside experts with S&OP creation and implementation experience can work with your stakeholder team to speed the design, process development and implementation of KPIs and a S&OP process customized for your organization.
The key values to the business of the S&OP process is the development of meaningful KPI measures of the business’ health, the discussion between the key stakeholders over past and current KPI results, and what can be done to continue improvements in all the operations of the business.