Setting up a sales and operation planning process

Sales and operations planning (S&OP) is something most companies have heard of, and many are working more or less actively with it. From our experience though, it is seldom emphasized enough, and the existing process might be outdated given current situation. A company that has grown successfully organically and through acquisitions for the past years could be a completely different animal compared to when the process was set. Higher revenue, larger footprint, more extensive product portfolio and different ways of working in acquired companies means new opportunities but also challenges from a planning perspective. So, what are the key areas to look at?

Key areas in how to set ut a sales and operation process

Firstly, let’s look at what an S&OP process is. Simply put, it is the process of coordinating needs throughout the value chain. This is important since there are often conflicting interests depending on your role. To take an example, as a sales responsible you want to ensure there is sufficient supply to be able to meet customer needs. You also want a large flexibility if the customer changes preference. As a production manager on the other hand, you want to run large batches in order to have good efficiency and have a predictable production schedule. Running large batches reduces flexibility, something sales dislike. Furthermore, stacking up on inventory to be on the safe side, will require a lot of capital, something management dislikes. To be able to find the right balance, a well-functioning S&OP process is required. Because at the end of the day, everybody wants the same thing – a successful business. However, focusing too much on one thing often leads to sub-optimization.

The first thing that needs to be done is to set up S&OP forums. There needs to be representative(s) from sales, production, sourcing, inventory, planning, logistics and finance. How these functions will differ from company to company and the important thing is that the forum covers the entire supply chain in the company.

Once the forums are set, there needs to be an overall responsible for coordination, documentation, and execution. Depending on how the companies are organized, this can differ a bit. Some companies have a dedicated planning department, then this is where the responsibility should be. Other companies group sourcing, inventory and planning under a supply chain department. Whereas others might have a staff function like operation excellence. Regardless, the organizational structure, overall responsibility should be within the operations.

Now that we have our forums and responsible person/department, we need to go into the actual content of the meeting. Remember, the purpose is to create an alignment on supply and demand. 

In order for us to do this, we need to collect input from each function. Sales need to need to compile forecasts and market outlook, operations need to compile current inventory levels, what is currently in production, material that is to be delivered and finance needs to compile targets and results from previous period. Compiling all material in an easy to digest format is important to create a good foundation for discussion. The overall purpose from here is to discuss if the forecasts from sales are realistic, if it is possible to accelerate sales of material currently in stock, if the production needs to make any changes to fulfill needs on demand and corrective actions if we see we are not reaching financial targets.

During the meeting, taking detailed notes is obviously crucial to ensure decisions are executed. Assigning clear responsibilities and sign-off on activities will facilitate successful implementation. If possible, the compiled data set should have simulation possibilities. This will help set up different scenarios and discuss pros and cons of taking different decisions. Again, this forum should be characterized by a sense of wanting to achieve the same target, a successful business.

So how often should these meeting be held? Once a month is usually a good frequency. This will enable follow-up of financial outcome for last month while the forum is not too infrequent. Important to note is that there will be smaller follow-up meetings in between the larger S&OP forums. This is where the actual work gets done. These follow-up meetings could be either within functions or between functions e.g. sales and operations.

Finally, the process must be dynamic to account for changes in the business. It is important that we have participants that reflect the organization, that we use adequate tools and focus our efforts where they have most impact. There is no golden rule on how this is done but taking a critical view on current ways of working every 6-12 months and every time bigger events take place is a good idea.

S&OP is all about ensuring alignment throughout the company value chain to facilitate good business decisions so we can fulfill our delivery promise to our customers at a sustainable cost and capital structure.


So, to sum this up, S&OP is all about ensuring alignment throughout the company value chain to facilitate good business decisions, so we can fulfill our delivery promise to our customers at a sustainable cost and capital structure.

Checklist for setting up an effective S&OP process:

  • Set up S&OP forums with representatives from the entire supply chain
  • Appoint an overall responsible person/department for the process
  • Decide on the S&OP forum’s content – What input is needed from which department?
  • Assign clear responsibilities and activities during and between forums
  • Agree on frequency for S&OP forum
  • Ensure a dynamic process to align with changes in the business


Need a working capital expert?

Capacent has carried out over 300 working capital projects and have experience from most industries. So if your company is pursuing working capital reductions, do not hesitate to contact Erik Påhlson ( We would be glad to make sure you get the most out of your initiative and are happy to tie our compensation to achieved results.


Erik Påhlson is Managing Director at Capacent_x. Erik has experience from driving working capital projects in a wide range of industries, such as manufacturing, trading companies, utilities, and retail.

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