The S&OP Integrated Planning Process

What is S&OP

Integrated planning is known as Sales and Operations Planning (S&OP). The S&OP is a process of democratic planning, with internal negotiation, which has brought benefits to companies, as better customer service and, at the same time, the reduction of inventories and costs on the entire supply chain. The internal operations alignment, with the consent of the executive director and external alignment to the market can be very profitable, so the interest of companies in carrying out the S&OP is increasing.

Team gathered for integrated planning

An indicator of this interest in companies is the investment of more than 2 billion dollars on supply chain planning software [1] [2] [3] .

At the leadership level, you have a plan until you change it. There can only be one planning system. If you have more than one plan, you don't actually have any.

However, many companies haven't seen the benefits of the S&OP yet because they have not changed their planning processes , while other companies changed the planning process and performed better than their competitors. Here, we describe the (i) planning process itself, (ii) the technology and (iii) the diagnosis that precedes its implementation.

The process

To be successful in the S&OP you need to follow the steps below. Write them down as a checklist.
  1. Regular meetings. The S&OP meetings should have a routine, on a monthly basis for instance. At the meeting we analyse the unlimited demand forecast and the capacity cuts, to evolve into fine tuning and integrationof the plans.

  2. Structured agendas Meetings must have a fixed duration, such as 2 to 4 hours. Analysts evaluate variances and root cause of the last plan , sales plan alignment with the production and logistics plan and final alignent before publication. It must be periodic.

  3. Previous work to support the meeting. The meeting of managements and boards should evaluate the synthesis of thedata, therefore, a previous job of data aggregating must be carried out. At the meeting, unlimited demand and the demand adjusted to production limits are evaluated, as well as the logistics and the financial impacts of adjustments.

  4. Interfunctional participation. S&OP meetings must have the participation of managerswhich are close to the market and managers who has continuous relationship to the vendors. That is, both sales as marketing managers, as manufacturing, purchasing and logistics managers. Finance team participates and quantifies the values to align with company goals. Each member must defend its area and negotiate.

  5. Participants have decision-making power. Meeting members are those with executive decision-making power inits functional areas, therefore, are formed by directors and managers. The meeting must be finished with a final consensus, without the need to return to executives to request further approvals.

  6. Disciplined process. The process must follow a schedule of participations and moderations,in a periodic and disciplined way, avoiding the dominance of the meeting by a member.

  7. Accounting of plans. Finance sector should strengthen the internal process by "quick" accounting of consensual resulting plan. So members can change and revise plans quickly and continuously provide feedback.

  8. The basic forecast for the process. The basis of the process from which the demand and purchase plan will emergemust be unbiased, unlimited demand forecast and based on facts by statistical and probabilistic analysis.

  9. Balance between demand and supply. The process must be flexible to quickly adjust to the changes in demand and conditions of purchase. Many companies fail at this stage . The sales and supply plan must be integrated and agile without having who suffer many changes in the S&OP meeting. There may be some cuts in the sales plan or changes in stocks to generate higher profits, so everyone should actively participate.

  10. Continuous evolution. The S&OP process itself must be measured to assess its effectiveness and adherence to forecasts, budgets, production and logistics plans. In the long term, the process must be guided by an integrated planning system instead of unsynchronized spreadsheets. The integration of forecasting demand with purchasing decisions, logistics and production is critical.

Watch the talk of some S&OP experts : [4] [5] [6] [7] [8]

The technology

Here we introduce you to the online S&OP software, but a software by itself, do not ensures effective planning. Its usefulness occurs when it enables the improvement of the business. However, conducting integrated planning via S&OP without a technology is complicated. The data needs to flow automatically and integrated, which is made possible only by sophisticated algorithms. In this way, technology is necessary but not sufficient.

The obsession with excess detail is detrimental to the process of S&OP, and results in the loss of focus on the management process. Success occurs with the understanding of the numbers of the resulting plan, assuming the assumptions and risks. It is important to recognize that different view points between decision makers add value to the final plan.

The aggregation of products, markets, vendors and processes is a vital condition to enable management process, changing the focus from the great magnitude of the data, to a global analysis, focused on the business. The integrated planning process needs to be simple.


Setting the elements of the S&OP system is a strategic decision that takes place in the design stage. It sets the system database format. The elements selected at this stage define the structure of the data, so they are called structural elements . A central issue in defining the elements is the data aggregation. In the S&OP model the structural elements are vendors, factories, distribution centers, customers, modals oftransport, components, finished products, factory machines and the number of planning periods.

The data, or parameters, in turn, are related to the sale, logistics, production and finance. Data from sales consists of the demand plan. The data of logistics are the availability of items, multiple lot, initial stock, stocksafety, maximum stock, final stock, transport capacity in the modal, inbound and outbound handling capacity in centers of distribution. Data from production are the bills of materials, assignment of products to machines, number of machines in factories, hours available for planning, time forpreventive maintenance, resource consumption by each product family, average resource efficiency, production yield, extra capacityavailable. Data from finance are product prices, percentage of taxes on products, costs of purchases, fixed resource costs, capacity expansion cost, costproduct variable, inventory cost and transportation cost.

System structural elements

Vendors 2 Aggregation across geographic regions, similarity in supply or transport cost.
Factories 2 Grouping into local productive arrangements (LPAs).
Distribution Centers 2 Grouping by location (warehouses, DCs, etc. in the same location).
Customers 2 Customers are aggregated into markets, service level or volume of demand.
Modes of transport 2 Grouping by transport capacity and cost.
Components 2 Grouping into modules and cost.
Finished products 2 Aggregation by distribution, manufacturing, or value characteristicsfrom the market.
Factory Machines 4 Grouping into transformation processes.
Planning Periods 2 Grouping over longer periods.
Holistic Vision

S&OP Analytical Systems are intended to provide a holistic insight. Following the concept of "Gestalt", "to know the parts you have to know the whole". Data from analytic systems differs from data from transactional systems as they result from descriptive models. These models analyze raw data from transactional systems aggregating them for use in analytical systems. Thus, aggregating the data allows for a holistic view of the entire company.

S&OP systems are analytical systems, therefore, with a focus on the future. Unlike systems ERP, MRP or MES, which are transactional systems, with a focus on the present and the past (reports). Analytical systems are based on models to create forecasts and future plans. Models use data from transactional systems as input. Upon completion of integrated planning, the results must be disaggregated to be used back in transactional systems.

Unlike traditional S&OP systems, where operations plan results should be "quickly" quantified by financial accounting, this S&OP system is guided by the financial components in order to automatically obtain the maximum profit plan. To reset all data, privileged access to the software is required.

The main functionality of the integrated S&OP systems is to drive fast "what if" analyzes. The analyses include changes in supply, demand, production, or logistics paramenters. Thus, planning the demand and operations need to be integrated and synchronized so that changes in demand or in supply are quickly reflected throughout the supply chain.

The implementation of an S&OP process depends on the maturity level of the company integrated planning. It makes sense to know where you are before determining where you want to go. Therefore, a diagnosis is needed to assess the most suitable momento to use a software with advanced technology.

The diagnosis

Process innovation is difficult because it implies a decision process change, how the information is used, and new activities and skills for the process. Thus, a maturity model can be useful. The current processes of several companies business planning is far from the 10 steps described here. It is required to follow an evolutionary process and follow them. The first step is to define how it is and finally identify the shortcomings and determining a roadmap for getting to the ideal stage. This maturity model has 4 stages, starting at a marginal process, evolving into a rudimentary process, then a classic process, and finally an ideal process.

  1. Marginal stage The marginal process occurs in companies that do the planning, but in informal and sporadic meetings, with low executive management involvement. Demand plans are disconnected and the supply plan is not aligned to demand plans. Usually it occurs through multiple electronics spreadsheets. Companies at this stage should migrate to subsequent stage so that everyone can contribute to a more harmonic and integrated planning.
  2. Rudimentary stage. The rudimentary process has a routine of meetings and a partial presence of decision makers. Demand plans are shared and aligned with the supply plans. It is adopted comercial software, individualized in its competence. It may happen that participants are frequent, but not if prepare for the meeting and not interact in getting a consensual plan. To migrate to the next stage, executives must act to ensure the operation of meetings and recognize the people who really can contribute.
  3. Classic stage. In a classic process, all members of the planning process participate. There is cross-functional coordination and integration with empowered staff. The planning process is integrated and aligned and the demand and supplies planning systems are integrated. To migrate to the next stage, members must increase the process automation and the relationship level with customers and vendors.
  4. Ideal stage. An ideal process is never fully achieved, but it must be understood as a benchmark by companies. In this step, the automation level of planning and the team's knowledge of planning is high so meetings occur to suggest improvements in the current process. There is a strong alignment between demand and supply, with the collaboration of customers and vendors. The technology is integrated by advanced S&OP optimization algorithms [9] [10] [11] [12] [13] [14] .

In addition to the material benefits, the S&OP process brings intangibles benefits, such as improving the work environment, in that everyone should be involved in the same plan, and the increase in business responsiveness in dynamic environments. Its implementation depends on the executive director's central support and the organization's support for analytical-based planning.


A company willing to implement the S&OP process must diagnose its integrated planning maturity level, follow the 10 success factors and adopt the technology which enables the process to run automatically. The strategy guides tactical planning. Therefore, the information must be worked on at an aggregated level. The meeting is composed of leaders with decision-making power. Finally, it is worth remembering that operational excellence comes from execution from the resulting S&OP plan, not from the plan itself.