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January 4, 2022

The Sales and Operations Planning (S&OP) Process Complete Playbook

The S&OP Process Complete Playbook

What is S&OP (Sales and Operations Planning)?

Many definitions exist.

“The simplest way to understand S&OP is to see it as a continuous way to synchronize every internal function against what the company believes is the unconstrained demand. And agree about the most efficient way to fulfill that demand, neither too early nor too late.”

In practical terms, it is a tactical monthly process looking at the medium term horizon, it is a recognized structure to perform a 360 degree review of the company performance metrics across key supply chain drivers and includes sales & marketing, supply chain (supply planning, demand planning, manufacturing, inventory management, new product introductions) and Finance as well as R&D.

Sales and Operations Planning focuses on month 3 up to month 18 - 36 (depending on the industry context) with more granular attention in the first periods. Ideally, the process should not focus on what is happening in the short term (next 3 months) to avoid the optimum decision making being challenged by the immediate firefighting. It can be difficult to stick to it when very operational stakeholders are involved and many short term issues are popping up.

The process includes stakeholders of numerous seniorities across all functions and usually culminates into a C-Level session at the end of the cycle.

A good S&OP should be smooth to implement, not be seen as an administrative and bureaucratic activity. A good S&OP process flow will enable a rapid and robust decision making process that will optimize the end to end value chain of the business.

At the end of the day, there are many ways to measure the efficiency of an S&OP, but in the end it always boils down to delivering high value to customers while staying profitable.

The process is more developed in some industries such as Manufacturing, FMCG (Fast Moving Consumer Goods) or Retail as there are a lot of physical flows involved. Thus the need to plan in advance is fundamental.

In fact, industries with lower margins will have had a burning platform to get S&OP right for a long time, while some other industries may leverage higher levels of working capital to cover for under optimized planning and siloed decision making.

It may feel like new industries such as SaaS do not really need a S&OP process but it is actually as important for them as for the large incumbent companies: booking the right human resources with the right skills at the right time is a sine qua none condition to reduce churn and facilitate rapid growth.

Playbook Index

Part 1

       ► Why S&OP and its origins

       ► The 6 stages of sales and operations planning

       ► How to calculate S&OP benefits

       ► 10 best S&OP KPIs

       ► 3 useful S&OP Quotes

Part 2 (coming soon)

       ► The 6 stages of sales and operations planning

       ► How to calculate S&OP benefits

       ► 10 best S&OP KPIs

       ► 3 useful S&OP Quotes

Why S&OP and its origins

Sales & Operations Planning (S&OP) is now a well-known enterprise management process with a wealth of literature available on the subject. As introduced, it aims to help companies to serve their customers while optimizing resources to deliver the most bottom-line results.


This term has been coined by Oliver Wight among other notorious consultancies and experts such as Tom Wallace who have produced and made their knowledge of Sales and Operations Planning available over many different channels (check Google!).


The process is also know by different names than S&OP, ranging from Integrated Business Planning (IBP), Sales Inventory Operation & Planning (SIO&P) or even more recently Enterprise Business Planning (EBP).

These numerous names have been introduced for many good (or not so good!) reasons.

The keys reasons would be:

To reinforce some aspects of the S&OP process that may not transpire within the standard acronym for the specific need of a company (e.g. SI&OP with the I for Inventory: a company may feel this is more appropriate if the business is having cash challenges);

To support the maturity development of the S&OP, by naming it differently once it has reached a set level of maturity which could help crystallize the improvements and become more tangible for internal and external stakeholders;

To support the (re)launch of an S&OP program within an organization which may have failed previously. Using the same name would implicitly suggest negative thoughts. Alternatively, a new name can lay a clean foundation with no preconceived ideas;

To market the S&OP process in some new ways to enable experts and providers to charge additional fees 😊 (E.g. IBP with a focus on New Production Introduction and Development & Financial Overlay, though I believe the very first definition of S&OP from the '70s would require paying attention to these elements to have a mature and effective S&OP).

The 6 stages of sales and operations planning

The 6 stages of S&OP

The S&OP is a process made of 6 steps

I - Product Review

Albeit the Sales and Operational Planning business process is a continuous cycle, the product review is the first step of every new cycle (a cycle is usually a month in the S&OP context for most enterprises).

The stakeholders are typically the demand planners, the product development team, marketing as well as R&D.

This review looks at all products in the portfolio, the ones being sold already and the ones in the pipeline.

The portfolio management and new product introduction management are strategic processes that are running in parallel of the S&OP and once a month (at least!) an overall alignment is done during this product review.

The aim of this step is to (non-exhaustive list):

           ► Ensure all stakeholders are familiar with medium term portfolio changes (new product, delisting, product upgrades (soft v hard)), prioritize them, allocate resources and consider impact with current sales volume;

           ► Highlight help needed from the commercial and the planning teams such as forecasting input, cannibalization risks as well as pricing strategy;

           ► Check launch dates for new products so they don’t clash with specific events (e.g. competition promotion events or store shelves update cadences), …

II - Key Account Reviews

Now we are getting into the foundational step of the process. No one should underestimate this step.

The point of this step is to build and update the unconstrained forecast (also called “consensus demand planning”). The unconstrained demand is the demand that can be sold to the market assuming a virtually infinite supply availability.

This step is typically performed for all major customers of the company. We call it a step but in fact this can be a number of preparatory activities building up to several meetings (one per key account).

While usually everyone knows which customers are important to include explicitly in this step, it can also be interesting to regularly run a quick pareto and cover the main customers covering 80% of the overall volume (or value/profit) making sure we get the right insights into the process.


This step's stakeholders include the key account managers (sales managers) and the demand planners (and sometimes customer service leads responsible for the respective key accounts)

The aim of this step is to (non-exhaustive list):

           ► Review past performances and understand volume and timing implications for the future (this typically includes cleaning up exceptional event visible in the sales actuals to make sure the future statistical forecast is not using wrong signals);

           ► Capture competitive information from the market place known by the Sales team;

           ► Capture risks and opportunities medium to long term from each customers.

III - Demand Review

The step is still about consolidating the unconstrained demand, but this time doing it at company level (or regional or category level for larger companies)

The stakeholders are typically one level up from the previous session, as it looks across all customers. This is often the realm of the Sales Director, Supply Chain Director or Demand and S&OP Managers.

The aim of this step is to (non-exhaustive list):

           ► Combine the unconstrained bottom up forecasts from all account and check if it makes sense at company and market level (e.g. in a mature market, if a large company believe they will double sales over the next 6 months, it is unlikely that the market can absorb that; yet it is possible that this is correct for a specific account);

           ► Validate the updated forecast and review the gap to the budget and whether any specific investments are required in order to bridge the gap (e.g. promotional events, marketing activities, additional or bring forward product launches);

           ► Identify and aggregate all risks and opportunities in the market so that the next step (Supply Review) can look at the numbers with the right insights in mind (e.g. the volume forecast may be 100 but there is 50% chance that it is 0 and 50% it is 200).

IV - Supply Review

This step is about syncing the supply plan with the demand plan. It is about getting the best supply plan to meet the unconstrained demand by balancing service level, working capital and operating costs.

Obviously, real life constraints are in the way of achieving this, so the step is about trying to resolve any supply hotspots with tactical changes and provide options to resolve challenges.

This step typically relies heavily on planning software solutions to optimize the supply plans.

Stakeholders are typically biased toward operations and supply. It involves supply and capacity planners, site managers and directors.

The aim of this step is to (non-exhaustive list):

           ► Get the best supply plan, one that is robust and resilient against future uncertainty (getting an overly optimized plan that only work in one specific set of events is probably not the right way forward);

           ► Resolve supply challenges by getting additional resources or escalate to the pre S&OP meeting what cannot be sorted with the currently available resources;

           ► Provide solutions to the demand folks to help them shaping and influencing that demand (e.g. you may not have product X but your customers may be happy with an alternative version Y at a small discount which would be better off than incurring extra costs or add a bullwhip effect in the supply chain to produce product X).

V - Pre S&OP meeting or Alignment meeting

This step is generally a series of meetings led by the senior leadership just below the c-level.

It is a true cross functional session that involves stakeholders from all functions from R&D, Marketing, Sales, Operations teams and of course Finance at different levels of seniority.

The whole point of this step is to rapidly reconcile and connect all the potential hotspots identified from a supply perspective, as well as the sales upside opportunities in trying to land an optimum plan.

This can be achieved either by allocating additional resources (time, money, etc.), by further influencing the demand or possibly by prioritizing specific customers or channels over others.

If not done previously, this step entails deeply looking at the bottom line impact of the latest plans. Making sure the gaps in terms of volume and sales (if any!) are translated into bottom line KPIs such as profitability, EBITDA, etc.

A good output of the session is to have all stakeholders aligned as to the best suite of recommendations to the executive session. And, whereby a consensus could not be reached, everyone is in agreement as to what should be escalated and the facts that need to be provided to support the ultimate decision making in the executive S&OP meeting.

VI - Executive S&OP meeting

Almost there, by now all the hard work has been done. Now it is all about putting it together.

This step is generally a meeting led by the senior leadership, by a c-level. It is a true cross functional session that involves all functions from R&D, Marketing, Sales,

Operations and of course Finance.

A good session shows the best plans to deliver the business objective: the best plan is the most optimum one, end-to-end. This may mean a sub optimal plan for the individual functions but one that is optimum overall.

Any remaining issues that could not be resolved in the previous steps of the process are being addressed here.

★ Nugget 1

In some companies, there is a more explicit and standalone financial review. Sometimes called something as simple as the Finance Review; there are several reasons why it can be implicit (like described in this article) or explicit in a company.

From a best practice stand point, the most important thing is that the financial appraisal is done continuously throughout the cycle. Basically every single decision should consider the financial perspective.

That is easy to say and more difficult to do for every stakeholder.

★★ Nugget 2

Large companies may have several S&OP process cycles in parallel. They can have one S&OP cycle per region and per product category, building up to dozens and dozens of S&OP cycles running in parallel globally, each interconnected to each other.

Therefore synchronizing them possibly requires some kind of arbitrage across regions and/or categories. Smaller companies may have only one S&OP process cycle.

How to calculate S&OP benefits

For a while, I have been looking around many sources and experts trying to be smart in identifying S&OP potential benefits. Most times I was wrong trying to be too precise. Strong with 25+ experiences over the last 10 years with clients and peers, I have developed a quick calculator with simple assumptions to get started. It is not perfect, but  it is in the right ball park.

 This simple and free S&OP benefits calculator is focused on 4 tangible levers that are indirectly affected by S&OP decision making. We hope it will help you.

It is obvious that these are definitely not the only levers to pull, but it is a great starting point. You will need to consider the possible impacts on your staff as well, which are not included here.

We have seen such huge differences between companies with this that we did not want to provide an overly simplified suggestion that would be wrong most times.

Getting S&OP right for a fast growing company or an already large enterprise is like going back to the optimum end to end decision making that happens in smaller structure and start ups, but with all the scaling opportunities that a bigger company has. An exciting place to be for any business.

While it is not easy, with the right process and digital enablers the return on investment is significant.

10 best S&OP KPIs


Great, you’re hooked by the “best S&OP Indicators”? Sorry… this title is a bit of a white lie, there are no perfect KPIs, it depends on your organization, culture, etc.

That being said, let me share here some KPIs that are worth considering in any organization. Tweak and prioritize them based on your needs. Of course, this list is definitely NOT exhaustive.

Here are 2 interesting KPIs for each of the different steps of the Sales and Operations Planning Process

I -  Product Review

Profitability per SKU

       ► Why?

Basically you want to understand if you are making money (or not) for the different products and categories within your portfolio. You may realize that most of the new products you bring to market actually don’t make you any profit for a long time or only for some clients, some periods or go to market channels. This may represent interesting teachings for the future.

       ► Tips?

Display them using a pareto type chart to show in which order they contribute to the bottom line. You can also show them on a chart showing profitability v demand variability or anything simple you can put your hands onto that will have a “aha” effect to your colleagues when looking at it! Decision making will be easier!

Market Share

       ► Why?

(Taking for granting that you know if you are a small player or a market leader in your industry) Looking at how your market share evolves over time for the whole market and per customer will be useful to understand the risks and opportunities of each and every SKU in your portfolio.

If you are already the market leader for your category and plan to double sales next year with the same product family, you may question whether the new product may need something new to influence the demand and create a category.

       ► Tips?

This one metric is rarely something visible to supply chain management folks. I would recommend getting acquainted with the one that will help shape and improve the understanding of the different functions as to what is essential to customers, what part of the portfolio may have more upside and variability in the future v today, etc.

II - Key Account Reviews

Forecast Accuracy

       ► Why?

“The grail KPI for some, just an annoying one for the sales team.” Forecast Accuracy is very important as it measures how well we predict the future demand, so we can prepare ourselves to supply that demand in advance.

Poor forecast accuracy is a leading indicator in how much bullwhip effect is likely to be found in the upstream supply chain.

The most important point is not to argue about what is the best metric to use (MAPE, unbiased MAPE, MAD, etc.) but rather to get the appropriate granularity in terms of SKUs and period. In some industries (e.g. fresh foods) you need to have a good forecast accuracy every day of the week while, in other industries you may be fine looking at a weekly bucket.

Similarly, looking at SKU level may not be as relevant as looking at things at groups of SKUs depending on your business.

Getting the aggregation to a granularity that you understand and can predict is key.

       ► Tips?

Measuring forecast accuracy at 2 different points in time is good practice. In that way you can identify whether the quality of the forecasting is improving as you get closer to the events (e.g. 3 months prior v 1 month prior).

Sales Forecast (Bias)

       ► Why?

The bias is a complementary view of the forecast accuracy, yet this time we look at it with the aim of identifying whether we are getting the forecast right over a period of time, or do we have a tendency to over or under estimate the demand.

Sales teams may be very good at getting the overall volume for a month right but not as good in knowing how this demand will be consumed throughout the month. Thus the forecast bias is greatly complementing your forecast accuracy measure.

       ► Tips?

Looking at the bias at SKU, product category and overall level will aid. Also, creating a signal indicator that flags a risk when a bias has a tendency to always be in the same direction is a good idea.

For instance, when for 3 periods in a row you are below 100% it means that you are constantly under estimating the demand; the forecast should probably be looked at.

Don’t forget that there is possibly a large behavioral bias in this KPI. We all have a tendency to try to under promise to over deliver or on the opposite to inflate future sales forecasts to secure the supply.

III - Demand Review(s)

Risks & Opps

       ► Why?

Forecasts are usually just numbers, many numbers. There are many assumptions in preparing them. There will always be some demand which will definitely happen and some part of the demand that may be at risk of not materializing.

On the other end, there are some opportunities in the forecast that you won’t integrate into the forecast yet as they are unlikely to happen, but they may. The point is, the supply team will benefit from understanding these additional insights in addition to just numbers.

       ► Tips?

Get a simple Trello or Spreadsheet to capture this if you don’t do it today. Don’t try to get it perfect immediately, the list will build over time. What is important is the conversation it triggers.

Profitability per account

       ► Why?

2 shipments are not created equal. It is important for the supply chain folks to have an opportunity to understand how much margin can be achieved for the different accounts in order to put sales folks requests in perspective. Similarly, it is key for the sales team to understand the operating costs involved in additional volume, express shipments or bespoke requests.

       ► Tips?

Doing it at SKU level may be challenging. A starter would be to do it per account and make sure it includes marketing and any misc. spend in addition to the full cost to serve.

IV - Supply Review(s)

Supply adherence to plan

       ► Why?

We want to check how well you predict the demand before it happens (= forecast accuracy) well. The other side of the coin is the adherence to plan. For instance, if you have manufacturing sites and they receive supply plans days or weeks in advance, they should be measured against their ability to fulfil the plan they are given.

       ► Tips?

To get this one useful, it is good to do it at different aggregations (SKU; production units; geographies, etc.). And over supplying is a bad as missing and as being under.

Cost of Goods Sold (CoGS)

       ► Why?

Provide visibility regarding the cost of the different products in the portfolio. Also, costs may evolve rapidly, either due to external circumstances such as energy costs or raw material cost price increases, as well as internally inflicted reasons such as a proliferation of product by creating a long tail of product while the operations are not suited for small batches.

       ► Tips?

It can be quite tricky to calculate, especially at SKU level sometimes. You may do best by keeping it at a higher level to avoid false precision.

V & VI - Alignment & Executive S&OP reviews

Here two good metrics to use are gap v budget as well as EBITDA (among many others!). Typically, these are already measured within companies but they may not be visible, S&OP is a good forum to make these visible to most, especially out of the finance and sales teams.

3 best S&OP Quotes

You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new. Steve Jobs

To optimize the whole, we must sub-optimize the parts. W. Edwards Demming

And the last one to close the first part of our S&OP Playbook:

The goal of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present. Paul Saffo 

The goal of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present. Paul Saffo

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