What is S&OP and How Can It Help Manufacturers Navigate Supply Chain Disruption?

Manufacturers today face numerous challenges in a volatile business environment—with supply chain disruptions being among the most significant. To effectively navigate these disruptions, companies need a well-oiled process that aligns operational plans with business goals. This need is where Sales and Operations Planning (S&OP) comes into play. By integrating S&OP with Integrated Business Planning (IBP) and eXtended Planning and Analysis (xP&A), manufacturers can better anticipate, adapt, and thrive despite uncertainties.

What Is S&OP, and Why Is It Important for Manufacturing Companies?

S&OP is a strategic process that aligns a company's demand and supply planning with the broader business objectives. But the process involves more than just balancing what a company can make with what its customers want. Instead, S&OP is about ensuring every aspect of the business—procurement, production, sales, marketing and more—is working toward the same goals.

For manufacturing companies, S&OP is particularly crucial. Manufacturing involves complex processes, long lead times, and significant investments in raw materials, labor ,and machinery. When supply and demand are misaligned, a company risks overproduction, stockouts, or worse, lost customers. S&OP helps manufacturers avoid these pitfalls by creating a clear, coordinated plan that everyone in the organization can follow.

In times of supply chain disruption, having a robust S&OP process means being able to respond quickly and efficiently to changes in the market. That quick, efficient response is possible whether changes are due to unexpected spikes in demand, supplier issues, or global events.

The S&OP Process: People, Processes, and Precision

A successful S&OP process isn't just a one-time effort. Instead, the process is a continuous cycle that requires input and collaboration across the entire organization. Here’s a look at the key elements of a typical S&OP process:

1. Demand Planning: This step involves forecasting future demand for products based on historical data, market trends, and customer insights. Gathering input from sales, marketing, and customer service teams ensures the forecast is as accurate as possible.
2. Supply Planning: Once the demand forecast is in place, the supply chain and operations teams collaborate to create a plan to meet this demand. This plan should include scheduling production, managing inventory, and ensuring raw materials are available when needed.
3. Pre-S&OP Meeting: This step is where the magic happens. At the meeting, representatives from all departments—sales, marketing, production, finance, and supply chain—come together to review the demand and supply plans. The goal is to identify any potential gaps or conflicts and identify solutions.
4. Executive S&OP Meeting: After the pre-S&OP meeting, senior executives review the proposed plan. They consider the company’s overall business strategy and make any necessary adjustments. Then, the final plan is approved and communicated across the organization.
5. Monitoring and Performance Review: The final step involves tracking the performance of the S&OP plan. During this step, key performance indicators (KPIs) such as forecast accuracy, inventory levels, and customer service metrics are monitored. Regular reviews allow the company to adjust as needed and continuously improve the process.

Critical Roles in S&OP:

• S&OP Leader/Manager: Oversees the entire process, ensuring all departments are aligned and the plan is executed effectively.
• Demand Planner: Focuses on creating an accurate demand forecast.
• Supply Chain Manager: Ensures the supply plan can meet the demand forecast.
• Finance: Provides financial analysis to ensure the plan aligns with the company's budget and profitability goals.
• Sales and Marketing: Provides insights into customer demand and market trends, helping to shape the demand plan.

Benefits of an S&OP Process in Navigating Supply Chain Disruptions

Implementing a robust S&OP process offers several benefits that are especially valuable during supply chain disruptions:

• Improved Forecast Accuracy: Better alignment between sales and operations leads to more accurate demand forecasts—reducing the risk of stockouts or excess inventory.
• Enhanced Agility: An integrated S&OP process allows companies to quickly adapt to changes in demand or supply—minimizing disruptions.
• Cost Optimization: S&OP aligns supply with demand to improve cost optimization—reducing waste, optimizing inventory levels, and improving overall cost efficiency.
• Better Collaboration: S&OP fosters cross-functional collaboration—ensuring all departments are working toward the same goals.
• Risk Mitigation: A well-planned S&OP process helps identify potential risks in the supply chain—allowing for proactive measures to mitigate those risks.
• Increased Customer Satisfaction: S&OP ensures products are available when and where customers need them—improving customer satisfaction and loyalty.
• Strategic Alignment: S&OP aligns operational activities with the company’s strategic goals—ensuring every decision supports the broader business objectives.

How Technology Can Supercharge Your S&OP Process

In today’s digital age, technology plays a crucial role in making the S&OP process more efficient and effective. Advanced software solutions, such as those that integrate IBP and xP&A, automate data collection, analysis, and reporting. With automation, creating accurate forecasts and responsive plans gets much easier.

OneStream allows for real-time collaboration across departments, breaking down silos and ensuring everyone is working from the same data set. While Sensible Machine Learning helps you analyze historical data to predict future trends, advanced analytics provide insights that help you make more informed decisions.

Here's a deeper look at the benefits OneStream brings in those three areas:

1. Scenario Modeling: Create multiple what-if scenarios to model the impact of changes to key business drivers (e.g., interest rates, changes to consumer demand, and supply chain disruptions) and internal scenarios (e.g., acquisitions, divestitures, debt issuances, and share buybacks).
2. Workflow Capabilities: Ensure no parts of the review and approval process are missed in the preparation of the rolling forecast by keeping everyone in the loop so that nothing gets overlooked in the planning cycle.
3. Predictive Analytics: Enhance speed and accuracy by automating tasks, improve risk management to identify risks and capitalize on opportunities, and increase strategic decision-making with more data analysis done quickly with predictive analytic capabilities.

Conclusion

With supply chain disruptions becoming increasingly common today, having a robust S&OP process is more important than ever for manufacturing companies. S&OP aligns demand and supply with broader business goals to help manufacturers navigate uncertainty with confidence. When combined with advanced technology and integrated approaches (e.g., IBP, xP&A), S&OP drives efficiency, improves collaboration, and ensures long-term success in a complex, ever-changing marketplace.

Investing in a strong S&OP process isn’t just about surviving disruptions—it’s about thriving despite them. So if your organization hasn’t already embraced S&OP, now is the time to start.

Learn More

To learn more about the importance of the S&OP process as part of the overall xP&A framework, check out our blog post Intelligent FP&A Software: You Can't Evolve to xP&A without S&OP.