Sales and Operations Planning

Process

Sales and Operations Planning (S&OP) is a business management process used by the executive team to achieve an alignment and synchronization among all functions of the organization. The goal is to properly balance supply and demand in the intermediate to long term. The process includes updating the high-level forecast which in turn leads to a sales plan, operations plan and inventory plan (or if applicable, backlog plan). Plan frequency is at least once a month and the planning horizon depends on the specifics of the industry.

Prerequisites

Before working with S&OP you need to define which MS sets to work with and calculate, or decide, an average sales price and cost for the parts included in the product family. These values will be used by S&OP to calculate the forecasted revenue and cost. You also need to setup target values for days on hand and backlog, and define the length of the forward planning horizon. The forward planning horizon is the planning window used in S&OP.

S&OP can be used both for product families that are Make-to-Stock (MTS) and product families that are Make-to-Order (MTO). When creating a new sales and operations plan you can choose to base the plan on a previous period version or different MS set, existing MS level 0 forecast and supply, or existing MS level 1 forecast and supply.

Calculations

For the time interval given, the system retrieves actual data grouped per statistical period for each product in the Planning BOM like this:

Past Periods

• Shipped Quantity: System considers shipments from Customer Order and Project Deliverables. System also calculates Shipped Amount and Cost Of Goods Sold (COGS) using the pricing information on the customer order lines.
• Last Year Shipped Quantity: System uses same logic as for Shipped Quantity, but looking one year back.
• Actual Receipts: Systems considers Shop Orders, Productions Schedule and Purchase Order.
• Actual Inventory. System uses the result from the job Aggregate Inventory Transactions per Period, so it is a prerequisite that this job has been executed.

Current Period

• Shipped Quantity: System considers shipments from Customer Order and Project Deliverables. System also calculates Shipped Amount and COGS using the pricing information on the customer order lines.
• Last Year Shipped Quantity: System uses same logic as for Shipped Quantity, but looking one year back.
• Order Book Qty: System considers open Customer Order Line demand and Project Deliverables. System also calculates the Order Book Amount and COGS using the pricing information on the customer order lines.
• Actual Receipts: Systems considers Shop Orders, Productions Schedule and Purchase Order.
• Actual Inventory: For current period the systems uses quantity on hand from Inventory Part In Stock.
• MS Level 1 Supply. System considers aggregated supply from MS Level 1 parts.
• Open Supply: Systems considers open supplies for Shop Orders, Productions Schedules and Purchase Orders.

Note MS Level 1 Forecast is not recalculated for current period since shipments during the month is reducing the forecast values in MS Level 1 Part.

Future Periods

• Last Year Shipped Quantity: System uses same logic as for Shipped Quantity, but looking one year back.
• Order Book Qty: System considers open Customer Order Line demand and Project Deliverables. System also calculates the Order Book Amount and COGS using the pricing information on the customer order lines.
• MS Level 1 Forecast. System considers aggregated forecast from MS Level 1 parts.
• MS Level 1 Supply. System considers aggregated supply from MS Level 1 parts.
• Open Supply: Systems considers open supplies for Shop Orders, Productions Schedules and Purchase Orders.
• Inventory Plan: For the first future period this is calculated as Actual Inventory - New Forecast + New Operations Plan. For subsequent future periods this is calculated as Previous Period Inventory Plan - New Forecast + New Plan.
• Backlog Plan: For the first future period this is calculated as Actual Backlog + New Forecast - New Operations Plan. For subsequent future periods this is calculated as Previous Period Backlog Plan + New Forecast - New Operations Plan.

In the end of this job, the system also checks for Period Versions which are older than: Current Period – Historical Period Versions to Keep.
These old plans are removed by this job.

Demand and Supply Planning

If you are using MS level 1, you can compare the MS level 1 forecast and supply for the master scheduled parts included in the product family with the sales and operations plan. This gives you a quick overview if there exist differences that need to be further analyzed. In the sales and operations plan you can also find forecasted revenue, based on average sales price, and order book amount, based on actual sales price.

When working with S&OP you review customer demand and supply resources and re-plan quantitatively across the forward planning horizon. Re-planning focuses on changes from the previous agreed period version. The sales and operations plan can be evaluated graphically to study forecast, inventory (or backlog plan), planned and target inventory (or backlog). Also, you can simultaneously compare plans for up to three different MS sets, to compare revenue, gross profit and cost. This enables you to examine the monetary effect of changing the operations plan or forecast.

The sales projections, based on shipped amount and forecast, can be evaluated per company, site or product family. Here you can review the revenue or gross profit and compare this to a baseline forecast, the forecast for the starting period.

Capacity Planning

In addition to working with planning and monetary terms, S&OP can also be used together with Resource Requirements Planning (RRP) to evaluate the effects of load from the operations plan or forecast. This is so you can do a rough-cut capacity check, and if necessary take action, before approving the sales and operations plan.

Release

Once a sales and operations plan has been approved, you can export the forecast to MS level 0. The forecast can be distributed up until a decided end date and distributed daily or weekly as per your choice.