Sales & Operations Planning (S&OP) embraces those activities and decisions made by a business in executing the operating activities that support achievement of the financial plan or budget. As the title suggests, the process is centred around the responsibilities held by the Sales and Operations functions. However, it is worth noting that an effective process extends to other business functions that contribute to delivery of the operating plan. Most importantly, S&OP defines a business process with mutually dependent activities and is not just a meeting. As with any process, the underpinning elements are:

  • A defined cycle of events
  • Clearly defined responsibilities
  • Timely execution

Responsibility for leading the S&OP process is often a delegated activity in organisations. Alongside delegation of responsibility there must be an appropriate level of authority that allows the process leaders and contributors to take the decisions required to operate the process. Therefore, total commitment from senior management to all levels of the organisation is a prerequisite for an effective S&OP process.

Process Elements

To understand the S&OP process it is worth viewing in context of the broader business activities as shown in Table 1.  Annual financial goals are defined through Budget Planning and are cascaded via management to the S&OP process. Depending upon the business, market and customer expectations, the regularity of some activities may vary between organisations. Quarterly budget reviews serve the purpose of monitoring progress and identifying gaps to achieving the business financial plan. The S&OP meeting performs a principle role in coordinating alignment between the financial and operating plans. A feedback loop is an essential part of any process that provides performance reporting and information to support decision making. Where potential shortfalls are identified, the S&OP forum will seek resolution to safeguard achievement of the financial plan. Feedback from the S&OP meeting to the budget review activity helps to shape the financial plan for subsequent months and years. A typical feedback report for the S&OP process would capture the following:

  • Planned performance
  • Risks
  • Opportunities
  • Escalation actions

Process Flow

The process is a flow of inter-connected and mutually dependent activities, as shown in Fig. 1. The S&OP meeting is the core feature that coordinates the output of daily, weekly and monthly routines to the less frequent business financial planning activities. Daily activities are reactive in nature and occur in response to planned events from external and internal influences. Conversely, all other elements of the process are planned events. For an effective process there needs to be a schedule of the key activities. It is also essential that the schedule is followed by the process contributors, as failure to adhere will cause the S&OP process to stall and effectiveness will be lost. In the S&OP meeting, stakeholders will assess upside opportunities and downside risks, taking account of equipment utilisation, inventory and manpower availability. In determining the optimum balance of cost against potential return, the S&OP meeting delivers tangible value for the company. All organisation employees gain a snapshot of current business performance via visual Information. Employees will seek to understand the causes for performance shortfall and the business will gain cross-functional support for the formulation of corrective action plans that will be ratified and committed to action via the S&OP process.


This article has introduced the concept of the Sales & Operations Planning process as a methodology to support the business in achieving the business financial plan. Through understanding all of the contributory elements of the process and defining a schedule of events, companies can begin to develop an S&OP process. An effective S&OP process forms a vital component that adds value by steering the business in an environment of changing dynamics and challenging market conditions.