Article | 12 min read

Sales and operations planning (S&OP): Definition, process, and best practices

See how sales and operations planning uses data to zero in on supply and demand issues so you can balance your business processes and set your teams up for success.

By Donny Kelwig, Contributing Writer

Last updated August 16, 2023

Most businesses put themselves in a customer’s shoes when creating their sales strategy. They ask themselves questions like:

  • What do customers want?
  • How do we make customers happy?
  • What are the best upsell strategies?

While centering your business around the customer is important, no company can provide high-quality customer experiences if it can’t communicate effectively, suffers from poor collaboration across departments, or has other internal issues in serious need of repair.

That’s where sales and operations planning (S&OP) comes in. It’s one of the most important tools you can use for developing and maintaining internal business health. Follow along as we take you through the S&OP meaning, process, and purpose.

What is sales and operations planning (S&OP)?

Sales and operations planning is the process by which leadership and executive teams collaborate to ensure all departments are balanced and functioning properly.

Ideally, the sales and operational planning process align the company’s financial plan with the supply and demand of the current products. S&OP finds solutions that reduce the inefficiencies that can arise from wasted resources, poor customer service, or over/underproduction.

A lack of collaboration and communication is a major cause of workplace failure, but it’s more common than you might think. In the Zendesk Customer Experience Trends Report 2022, 26 percent of organizations surveyed admitted that they need to identify new ways to enable cross-department collaboration.

It’s safe to say that your S&OP process is likely in need of a refresh, too—doing so can take your business to the next level. Recent studies show that companies with successful alignment are a whopping 67 percent more effective at closing deals.

These numbers should be a wake-up call for anyone who doubts the power of business communication and sales operation planning. Let’s dive into the S&OP process and purpose to make sure your company is one of the few rising to the top.

Sales and operations planning purpose

Organizations have a lot of moving parts. The purpose of S&OP is to create alignment throughout the business. Companies may leverage S&OP to:

  • Improve the entire customer experience
  • Balance supply and demand
  • Increase transparency across departments
  • Improve communication between teams
  • Enhance inventory management
  • Refine processes
  • Improve budgets and sales forecasts
  • Expand organizational knowledge of a product’s lifecycle

Sales and op planning might occur monthly, yearly, or any other time increment that makes sense. It all depends on the company and its objectives.

Sales and operations planning benefits

S&OP drastically improves communication and consistency across departments, but there are numerous other benefits as well. The pros of S&OP go far beyond simply getting everyone on the same page.

With S&OP, companies can:

  • Gain more accurate data—enabling faster, more frequent adjustments in the supply chain and sales pipeline to fix problems in real time.
  • Optimize resources, reduce waste, and boost productivity.
  • Eliminate departmental silos to align data points and increase efficiency.
  • Improve customer service with better inventory and backlog management.
  • Fight stagnation by finding easy adjustments to internal and external barriers and updating the sales process accordingly.
  • Use unbiased data to create achievable KPIs across teams.

All these benefits come from the unification of departments and data. When everyone works from the same numbers, each team can better serve the others. When you have strong S&OP, by the time you get to the customer and the sales journey, you’re already ahead of the game.

Which stakeholders are in the S&OP meeting?

To better understand the S&OP process, you need to know who’s on your team. Here’s a breakdown of the average S&OP meeting room:

Executive management: This is your CEO or C-suite executive. They run the meeting and hold the company accountable for following the approved plan. Additionally, executive management serves as conflict resolution and makes final decisions if necessary.

Department leaders: These leaders represent every department in a company. There should be a representative (usually a manager) present from each team. These leaders speak to their department’s performance and ensure their employees stick to the plan.

Demand planner: The demand planner analyzes statistics on past and present demand to create accurate demand forecasting before the meeting. They then present all demand-related information.

Supply planner: The supply planner presents similar information to the demand planner, but they also review the supply chain, inventory, and orders regularly to reduce over/underproduction.

Operations leader: The operations leader works with supply and production to make sure all operations are functioning at a level that will meet the S&OP plan. They also present actual vs. forecasted performance data regarding inventory and address any backlog.

6 steps of the S&OP process

6 steps of the S&OP process

The S&OP process is more than just a meeting. The process starts with gathering data and ends when the plan is fully implemented. But you’re likely wondering: How can sales and operations planning be integrated? Here are the six steps of the S&OP process.

1. Gather and manage data (forecasting)

Each team collects data for the given time period, including:

  • Past sales
  • Trend analysis
  • Plan success rates
  • Accuracy

This data is formatted into forecasts for the demand planner. The key departments involved are sales, marketing, operations/supply, logistics, and finance. Ideally, your company has software that compiles this information on an ongoing basis, but if not, you may want to consider investing in a CRM.

2. Demand planning

After accounting validates the forecasts for variability, they will make adjustments and build a demand plan. The plan includes:

  • Customer service policies
  • Promotions
  • One-time events
  • New launches

This step is managed by the demand planner, but sales and marketing should provide input on the finalized plan before the S&OP meeting.

3. Production and supply planning

Using the demand plan, the head of supply works with operations to create a supply plan. This includes:

  • Inventory targets
  • Safety stock
  • Production methods
  • Possible liabilities in capacity
  • Inventory
  • Scheduling

Any necessary pre-launch logistical changes should also be included in the presentation.

4. Pre-S&Op meeting (plan reconciliation)

The supply and demand plans are reconciled, and changes are made based on how realistically the plans accommodate each other. Finance is an essential department in this step, as all plans must be kept within a pre-established budget. If a significantly costly obstacle comes to light, this is the time to assess if the company has the funds to move forward with this plan or if certain aspects need to wait for the next fiscal year.

5. Executive S&OP meeting

Once everything is finalized, the plans are presented at the executive S&OP meeting. By the end of the meeting, there should be an implementable, agreed-upon plan for the entire company.

6. Implementation

Each department leader works with their team as well as cross-functionally to make the changes required in the plan. Regular evaluation of the implementation is recommended.

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S&OP best practices: Tips for collaboration between sales and operations

Now that you’ve learned the meaning of S&OP and how to organize an S&OP meeting, how do you make the most of it? Here are a few best practices for creating alignment and facilitating collaboration between sales and operations.

Make sure sales and operations work toward the same goal

It’s hard for your sales teams to sell aged inventory and for your operations team to meet sales demands if they’re kept out of the loop. It doesn’t matter how good your sales team is if they’re selling faster than your ops team can keep up. An underproduction of products (especially when sales are high) only results in angry customers and ultimately hurts your bottom line.

When you’re creating your sales plan, factor in operations. If your primary sales goal for the month is to sell $50,000 worth of your newest product, then your operations team needs to have $50,000 worth of that product ready to go. Similarly, don’t create a sales plan without looking at your current operations situation.

If you have a severe overproduction of one product from the previous month, factor it into your sales plan. Brainstorm ways to balance inventory with sales. Some ideas include:

  • Offering a sale or a deal to move the remaining product
  • Offering a discount on an older product with the purchase of a new product

However you choose to move forward, it’s crucial to ensure sales and operations teams are aligned so you aren’t dealing with unexpected supply issues and disgruntled teams at the next S&OP meeting.

Roll out cross-department training

Most training focuses on sales and ways to better handle and maneuver customers through the sales pipeline. But equally important is internal company training on S&OP. If you’re investing in training for your employees and managers, address internal issues before you start working on external issues.

If you’re setting up long-term distribution deals, for instance, your salespeople need a strong understanding of your company’s S&OP supply chain. Otherwise, they’re selling large amounts of products on an ongoing basis without knowledge of how those products are created or awareness of supply limitations.

By training cross-departmentally, your teams will work more efficiently and effectively—and that improved collaboration will be reflected in your bottom line.

Sharpen the sales and operations execution process

The hardest part of a plan is implementing it, so why make it harder? When you can simplify and streamline your sales and operations process, it’s not only easier to understand across departments—it’s also easier for team leaders to execute.

We’ve all been part of the big planning meetings that ultimately go nowhere because the plan never comes to fruition. Unused plans are a massive waste of time and resources, and teams grow frustrated when structural change happens slowly. Keep the plans simple, appoint plan executors, and make visible changes.

Share feedback across departments

When one department gets a valuable piece of customer feedback, share it with other departments. Together, teams can take feedback and leverage it to craft better products, services, and experiences for the customer.

Create a centralized place for teams to leave notes regarding customer feedback. You can collect feedback through different channels, including:

  • Chatbots
  • Customer surveys
  • Customer satisfaction score (CSAT) and NPS® scores
  • Customer reviews
  • Social media
  • Voice of the Customer (VoC) programs
  • Support tickets

You can compile and analyze all this information into reports and then come up with solutions.

Eliminate communication gaps

Communication between departments is essential to keep a business running like a well-oiled machine. Providing teams with processes and resources that eliminate communication gaps can set them up for success.

Although tools like Slack offer instant communication, a fast response isn’t always the best response. Constant back-and-forth to ask for more or better information wastes time and energy. Setting reasonable expectations for response times and providing training on what information to include in the correspondence can help ensure conversations between employees are concise and productive.

Assign one person ownership

Although it’s critical to have input from leaders of each team, assigning one person ownership will drive the process more efficiently. Giving ownership to an entire committee can create communication bloat and make decision-making less effective. Assigning a single person to oversee the process allows for:

  • Convenient two-way communication
  • Stronger negotiation
  • Better decision-making

Keep records of everything

By maintaining clear records of the changes made and the results throughout the process, you’ll learn how to better implement your sales and operations plan. As strategies evolve, you can look back at your notes and determine what worked, what didn’t, and why. This provides valuable insight into what adjustments you need to make and which plan works best for your business.

Promote cross-organizational collaboration

Arm your employees with tools that help your entire organization collaborate better. Your team should use software that puts conversations and interactions in one unified place, so everyone across departments has access to customer information and context.

Support your sales operations department

Without effective implementation, your plan may never get off the ground. Surround your sales operations team with a nurturing work environment that cultivates success and puts the sales and operations plan into action. If your company doesn’t provide the necessary resources or promote cross-departmental communication and collaboration, productivity will suffer.

Choose your key metrics

Putting a supply and operation plan in place isn’t enough. What you’re executing must be effective and align with the evolving needs of each department.

Understanding which metrics to watch and how to analyze your data is vital for your plan to succeed. Identify the areas you want to improve the most, and pick metrics based on your company’s strengths and weaknesses so you can keep your business on track.

S&OP metrics

Going through the S&OP process can be difficult, even in the most organized of companies. We recommend tracking the following metrics and KPIs to end your S&OP session with comprehensive data:

  • Total sales: the total sales in your given time period (month, year, quarter, etc.).
  • Sales forecast vs. actual total sales: your total sales in comparison to the expected amount of sales for the given time period.
  • Gross margin: the net sales once you subtract the cost of goods sold and services provided in the given time period.
  • Working capital: the difference between your current assets and current liabilities in a given time period.
  • Inventory turnover: the number of times your inventory is sold and replaced in a given time period.
  • Capacity utilization: the percentage of an organization’s potential output that is actually being realized.
  • Cycle times: the time spent producing an item or providing a service from the start of the first task through the end of the last task.
  • Production forecast: the projection of how many end items will be needed to meet the sales forecast.

How a CRM simplifies your S&OP

CRM simplifies your S&OP, three people talking

S&OP is all about using accurate data to shape the future of your company—and nothing tracks accurate data like a strong CRM. With Zendesk Sell, our sales CRM, data gathering is an automated breeze. Not only can you monitor numerous KPIs with guaranteed accuracy, but you can also make this data available to every team member. When all employees are on the same page and working from the same set of data, your customers and your profits reap the rewards.

Zendesk Sell can help your business hit the ground running quickly with features that include:

  • Easy integration
  • Automation
  • Customization
  • Reporting

Request a demo of Zendesk Sell today and witness the benefits of fast and accurate data for your sales and operations process.

Free sales and operations planning tools

Ready to mind your business? Take your company to the next level with our free sales and operations planning template.

Free sales and operations planning tools

Ready to mind your business? Take your company to the next level with our free sales and operations planning template.

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