Sales and Operations Planning (S&OP)
Purpose and cadence
S&OP is a monthly, cross-functional decision process that balances demand and supply at the product-family level over a rolling horizon (commonly 18–36 months in monthly buckets) and keeps the operational plan consistent with the business plan. The classic five steps: data gathering, demand review, supply review, reconciliation/pre-S&OP with financial integration, and executive S&OP where decisions are made and the single set of numbers is authorized.
What examiners test
- Volume versus mix: S&OP balances aggregate volume by family; mix is resolved later in master scheduling.
- The demand plan is a consensus plan, not the statistical forecast - it adds market intelligence and management judgement and is expressed in units and money.
- The supply review must expose real constraints (capacity, material, labor, cash), not simply endorse demand.
- Reconciliation forces choices: chase (hire/overtime), level (build and debuild inventory), subcontract, or manage demand through price, lead time, and allocation.
- Maturity fails when one function owns it, when it is a reporting meeting without decisions, or when a shadow schedule bypasses it.
Traps
Calling a forecast review S&OP; assuming supply must always equal demand; letting executives re-forecast instead of authorize; measuring only forecast accuracy and never plan attainment; letting sandbagging or unconstrained wish-lists into the plan.
Worked example
Annual demand plan 48,000 units (4,000/month average) with a Q3 peak of 5,600/month. Regular capacity 4,500; overtime of 10% adds 450, giving 4,950. Gap = 650 units. Options: prebuild 650 in low months (carrying cost), subcontract, or shift demand. Rule of thumb: balance at family level across the whole horizon - never plan output you cannot physically make in the peak month.