Part 1
Course reading
Sales and Operations Planning (S&OP) is a monthly process that brings sales, marketing, operations, procurement and finance together to agree one plan for the next 3 to 18 months. Without S&OP, sales sells one number, production builds another and procurement buys a third.
The standard monthly cycle has five steps: 1) Data gathering: update actual sales, inventory and forecast accuracy. 2) Demand review: sales and marketing agree the unconstrained demand forecast, including promotions and new products. 3) Supply review: operations checks capacity, materials and supplier constraints against that demand. 4) Pre-S&OP meeting: resolve gaps, prepare scenarios and their cost. 5) Executive S&OP: leadership approves the final plan and trade-offs.
Example: demand review forecasts 12,000 units for March, but the plant can make 10,000. Options: build 1,000 extra in February (inventory cost), add a weekend shift (overtime cost), subcontract 2,000 (higher unit cost) or accept a lower service level. The pre-S&OP team prices each option so executives can decide.
Measures: forecast accuracy (1 minus absolute error / actual), forecast bias, plan adherence, inventory days of cover and customer service level. Example: forecast 1,000, actual 900. Absolute error 100, accuracy = 1 - 100/900 = about 89 percent. In SAP, demand plans can flow from IBP or the Flexible Planning (MC93) into demand management (MD61) as planned independent requirements for MRP.