What Is Sales & Operations Planning (S&OP) in the Digital Age

Ana C. Pichot

Last updated: September 26, 2023 | 5 min

How can you leverage technology for Better Business Planning

In volatile and changing environments, sales and operations planning (S&OP) helps businesses work in a far more agile way.

If your goal is to embark on the path to operational excellence, S&OP allows businesses to close the gap between its strategy and day-to-day operational objectives. However, for S&OP to work effectively, the people, processes, and technology must be seamlessly connected.

With the support of an expert consultant and the right training, you might find that half the battle has been won. But the real challenge is in aligning and co-ordinating cross-functional teams to enable effective collaboration.

So how can technology integrate the people and processes throughout your business? More importantly, how can an advanced planning tool like Slim4 help you to unlock the full potential of S&OP in your business?

In this article, we will delve into the fundamentals of S&OP and the challenges business face in implementing it. We will also explore how Slim4 can underpin every step of your process to help you can your team to reap the rewards of this powerful strategic framework.

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Strategy and tactics in the S&OP process

In the context of Sales and Operations Planning (S&OP), strategy and tactics are interconnected components that play distinct roles in the overall planning process. And the terms Above the line and Bellow the line are commonly used to distinguish between these key perspectives.

Strategic S&OP: Above the line

Above the line (also known as top-down or strategic S&OP) refers to the high-level planning process that focuses on strategic decisions related to product portfolio, demand and supply. It involves executive-level discussions and decisions on long-term sales forecasts, business strategies, market trends and resource allocation. Above the line S&OP typically covers a longer planning horizon, often months or even years.

Tactical S&OP: Below the line S&OP

On the other hand, Below the line S&OP (also known as operational S&OP or tactical S&OP) refers to the detailed planning process that takes place at more operational levels of the organisation.

It involves translating strategic decisions made Above the line into actionable plans for specific products, regions or timeframes. Below the line S&OP focuses on shorter-term planning horizons, typically weeks or months, and involves considerations such as production scheduling, inventory management, procurement and distribution planning.

Strategy Vs Tactics

The main differences between S&OP Above the line and Below the line can be summarised as follows:

Strategic vs. tactical approach

Above the line S&OP focuses on strategic decision-making and long-term planning, while Below the line S&OP focuses on tactical and operational planning.

Overview vs. detailed view

Above the line S&OP involves high-level discussions and decisions, while Below the line S&OP involves more detailed planning and execution.

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Short-term vs. long-term planning

S&OP Above the line usually covers a longer planning horizon, while S&OP Below the line covers shorter-term horizons.

Both Above the line and Below the line S&OP are important components of an effective S&OP process, as they help align strategic objectives with operational execution and ensure that the organisation is well prepared to meet customer demands while optimising its resources.

The S&OP predicament

The challenge for many businesses is that the top line strategy is often disconnected from the below the line tactical and operational execution. Furthermore, with disparate tools and processes between various teams across the organisation, achieving fully joined up planning will always an uphill battle.

Over the last 30 years, we have developed our Slim4 supply chain planning platform to sit at the heart of the S&OP process. By connecting teams around a single source of truth communications suddenly become seamless and transparent. But more importantly, trust between teams increases as everyone understands the crucial impact their decisions and actions have the wider business goals.

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Slim4: A complete platform for S&OP success

With Slim4, you can optimise the fundamental steps of an S&OP process to create visibility and encourage collaboration between teams.

It is easier to be consistent and committed when all teams know what they have to do and what is happening within the organisation. By bringing everyone together with a unified planning platform, Slim4 helps businesses take strategic, tactical and operational actions with confidence.

Let’s take a closer look at some of the key S&OP processes and how they are supported by Slim4:

Data Collection & Validation

For S&OP to work effectively, you need accurate and reliable data.

Thankfully, businesses create vast amount of data. And with the combination of data sourced from customers, suppliers and other supply chain partners, there is no shortage of data points to utilise.

However, capturing these essential insights and validating them is where many struggle. Without the access to the right insights, both visibility and your teams’ decision-making capabilities will be severely hampered. Put simply, running your S&OP process with our robust data, like driving in the dark with no lights.

Slim4 automatically collects sales and inventory data from your ERP. Furthermore, by incorporating external data, Slim4 allows businesses to create comprehensive view of the entire operation while establishing a solid foundation for effective decision making.

Product Management Review Process

Managing the product portfolio is no mean feat. Determining which items should be included within your assortment and which items should be managed out takes time and often comes with great risk.

Unless you have a system in place that allows you to make these decisions in an agile and rational way, your operation could be left exposed to the pitfalls of excess and obsolete inventory.

From assortment planning, new product launches, recalls, promotions and event planning, Slim4 supports the entire product management review process within a single unified platform.

The great advantage of an S&OP process is that it promotes collaboration and communication. Communicating product portfolio changes in a timely manner facilitates not only improved business benefit but also harmony between cross-functional teams.

By enabling the seamless exchange of information and insight between all team members, Slim4 pulls Sales, Marketing and Operations together to make aligned portfolio decisions.

Furthermore, through automating the execution of assortment processes and providing dynamic exception-based alerts, Slim4 helps free up your team’s time while still keeping your decision makers firmly in the driving seat.

Let’s delve a little deeper into this.

New product introduction

Whether you are considering launching a new product to the market, introducing a new brand to the catalogue, or just expanding the assortment in general, these are all examples of above the line strategic decisions. However, they often have a direct impact on your operational execution, i.e.

Below the line.

For example, if you are on a mission to launch a new product within a specific market this a strategic decision. However, there are also operational actions that need to be taken such as adjusting the labelling, determining the transport logistics, meeting the local health and safety requirements, and so on and so forth.

For a product manager, time to market is the most important thing and being able to prepare for market entry in advance and with the right initiatives is fundamental. You have to know how much to order from the supplier or how much you are going to produce if you want to enter the market with a good margin and quality product.

In anticipation of new product launches, Slim4 allows you to remain strategically focused while providing your team the agility to respond to the market dynamics. By creating visibility over your entire assortment and alerting your team to product families that are losing sales or market launches are over-performing, you can take proactive steps to minimise risks and maximise opportunities.

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Planning for promotions, events, product introductions and product recalls

Whether is concerns initiatives at product, category, sales channel or even an market-wide level, planning events and promotions is a key responsibility for Brand and Product managers.

From planning Festive campaigns, one-off sales events and Black Friday deals, to new product campaigns and even managing product recalls, Slim4 helps your team to quickly anticipate the impact of such activity. By taking into account past promotions and the market conditions, Slim4 helps anticipate the uplift factor to determine the potential increase in sales volume.

All these plans serve the sales and marketing team as a tool to stimulate product demand, reinforce brand image and retain and win customers. Slim4 captures all these plans and translates them into distribution, production and/or purchasing requirements. As a result, your entire upstream operation is geared up to ensure the inventory arrives at the point of sale, thus maximising the expected sales opportunity of the promotion.

Furthermore, within a single screen, Slim4 provides a complete overview of the status and performance of each promotion. By comparing realised sales against the plan, your team can evaluate promotional effects such as halo, cannibalisation and saturation to optimise future promotions.

Demand review process

One of the fundamental objectives of S&OP is to attain a single view of future demand the whole organisation can depend on. If there is only version of the truth and this is shared and understood by all, synchronising strategies, tactics and plans across every department becomes all the easier.

Achieving this single number is a little more complicated. After all, to underpin both above and the below the line decisions, you need to understand expected level of sales at the appropriate and relevant level of aggregation against which we will compare our expectations and ambitions as a company or budget.

Understand expected demand at all levels relevant to the company

As each team has knowledge and information in its area of responsibility, “the number” must be able to be created and compared at different levels. For example, an export manager will want to see what the sales forecast will look like in different markets or countries of expansion.

Conversely, a regional sales manager will want to see his sales forecast grouped by local sales territories. A global operations manager may even want this same information, but grouped into sales by regions or continents.

A channel manager will want to have visibility on demand in different channels such as distributors, garages, large supermarket chains, retailers, franchises, online. Finally, brand managers, category managers and product managers will want to see aggregated information by brand, category and family.

With Slim4, it is possible to create customised aggregations from a matrix that crosses multiple geographic components and multiple assortment components. in addition, Slim4 offers the option to take into account or discard promotional demand from the plan. As a result, business can create a robust picture of future demand at all levels of the business.

Define the planning horizon

The planning horizon is also an important consideration. From a planning perspective, we have to ask ourselves: What are the risks? Are they manageable? Is there an opportunity in the market? Are our customers changing their behaviour?

From anticipating lead times, and disruptions in the supply chain to planning for changes in our production capacity, new machinery or even establishing new production facilities, we need to plan at the right horizon.

In Slim4 you can determine the most appropriate planning horizon be it 12, 24 or 36 months. and include the seasonality component in the forecasting plan.

Translating the unit of measurement

The next step is to translate “the number” into the different languages, i.e. the different units of measurement. While the sales team will want to see the demand plan in euros, operations will want to see it in units, finance will want to see it in margin and logistics in pallets or containers.

Slim4 allows the same demand plan to be displayed in up to 11 different units of measure, including the POS sales line price so that net sales are integrated into the demand forecast plan.

Organic growth and budget creation

Annual price list changes and structural sales increases are part of our demand forecasts. Slim4 allows us to assess expected organic growth by price increases and by sales volume increases at all levels of aggregation.

As it is not easy to create the annual budget, it is often a percentage increase on top of the previous year’s sales. Slim4 assists companies in creating the budget by calculating the percentage contribution on past sales or future sales at all levels including the organic growth component.

Slim4 evaluates and monitors sales and forecasts on a monthly basis and reports through different KPIs. By always measuring from a baseline and comparing with the previous year, quarter or month it is possible to know if we have increased sales or not, and to detect in time how close or how far we are from our budget.

Forecast Accuracy

An S&OP process is a team sport and success or failure will depend to a large extent as much on “numbers” as on people. So we will need to measure how good our S&OP process is. We want to know if we are sharing enough information, with our customers, suppliers and teammates, and how good this information is.

Slim4 measures forecast accuracy automatically on a monthly basis. This means comparing actual sales against expected sales and thus being able to assess whether all those external factors that only the teams know about have been included, such as market trends and trends of our most important customers, promotions and events.

Integrate directives, long-term initiatives/leads

Our assessment of market conditions and our competitors will shape our strategic decisions. Ease of entry into a new market may prompt us to undertake a new initiative or open a new regional warehouse in emerging market.

Or, conversely, perhaps the arrival of competitors in a particular market will push us towards initiatives involving the launch of new product and production lines or new agreements with strategic suppliers.

Slim4 shows on a single screen the strategies of the company or directives and their different initiatives or levers. By focusing on different swimlanes it allows us to have a real picture of the progress of the agreed plans during the S&OP process allowing to manage responsibilities and deadlines.

Slim4 allows initiatives to be created quickly for each level of aggregation, making decision making more agile. Slim4 translates the expected impact into the forecast according to the planned execution schedule. This allows visibility on the annual action plan to reach budget targets.

In addition, you can decide whether you want to move the impact of the initiative to the SKU level or keep it at the aggregate level, facilitating the connection between the higher planning levels and the more granular (below the line) levels.

Inventory and Supply Review Process

With the demand review process complete, it is necessary to assess whether we have sufficient capacity to meet the plan. This process includes assessing our suppliers and our production capacity. Slim4 helps you understand your suppliers so you can be more competitive. When a supplier is not able to deliver the entire order on the agreed date, we can measure their capacity for future commitment or OTIF.

It is also necessary to measure the quantity actually delivered in relation to the quantity initially ordered. In this way we know what percentage of the expected volume CVP (Confirmed Volume percentage) has been met.

Using these two indicators, we can predict the future behaviour of our suppliers and assess the past and thus act: should we look for new suppliers, should we change that component of the product that allows us to minimise the risk of stock-outs, do we need to increase the purchasing budget, if so, how much risk are we willing to take? If so, how much risk are we willing to take?

You can also manage your purchase budget for each region, country, family, sub-family. In this way, the purchase budgets are in line with the risk you want to take.

S&OP takeaways and how Slim4 can help you

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Supply chain success is only possible if people, processes and technology are truly connected. By underpinning each step your S&OP, Slim4 is designed to underpin both your strategic and tactical S&OP. By unifying the process within a single platform, you can eliminate disparate processes and tools to ensure everyone in the business is on the same page.

The key objectives of an S&OP process are to maximise opportunities, minimise risks and make appropriate decisions based on the real expected benefit for the whole company. It is precisely this overall benefit that teams should focus on.

But implementing an S&OP process is not without its challenges. Educating and motivating people to the new paradigm, designing a good process, aligning team objectives, not magnifying the expectations generated and at the same time achieving quick wins… It is not an easy task.

If you want to start an S&OP process, remember, it is a journey that never ends and you need to select a good travelling companion.

S&OP in the digital age FAQs

What are the benefits of using technology to support S&OP processes?

Using technology to support S&OP processes brings numerous benefits. It enhances efficiency, enables automation of routine tasks, and improves collaboration. Furthermore, technology ensures accurate data for forecasting and planning, reducing errors and optimizing inventory.

Ultimately, technology can help you to streamline operations, improve customer satisfaction, and provide a competitive advantage.

What role does technology play in enhancing data accuracy and integrity in S&OP?

Technology plays a pivotal role in enhancing data accuracy and integrity in S&OP.

By automating data collection and integration from various sources, technology can help reduce the risk of manual errors and inconsistencies.

It enables real-time data updates, ensuring that information used for forecasting, demand planning, and decision-making is current and reliable. Additionally, technology tools often employ advanced algorithms and analytics to identify and rectify data anomalies or outliers, further improving data quality.

By promoting data accuracy and integrity, technology enhances the overall reliability of S&OP processes, leading to more informed decision-making and improved outcomes.

How can technology support the automation of routine tasks in S&OP, allowing more time for strategic decision-making?

Through process automation, technology can streamline activities such as data collection, report generation, and analysis. By automating these repetitive tasks, organizations can reduce manual effort, minimise errors, and accelerate the overall S&OP cycle.

This automation not only saves time but also enhances efficiency and productivity. With routine tasks taken care of by technology, professionals can focus their efforts on analysing data, interpreting insights, and making strategic decisions that drive business growth and improve the S&OP process.

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