The Sales & Operations Planning Process

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  • 0:01 Sales & Operations Planning
  • 0:51 Data & Planning
  • 2:21 Meetings
  • 4:12 Lesson Summary
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Lesson Transcript
Instructor: Natalie Boyd

Natalie is a teacher and holds an MA in English Education and is in progress on her PhD in psychology.

How can companies plan for variations in the demand for their products? In this lesson, we'll examine the sales and operations planning process, focusing on the five major steps that most companies follow.

Sales and Operations Planning

Zaff runs a company that makes tents and other outdoor goods. They do pretty well overall, but he's run into an issue. Most people buy tents in the spring and summer. In the winter, Zaff's company is still making tents, but no one's buying them. How can he adjust his company's production to meet demand when demand is constantly shifting?

Sales and operations planning, often abbreviated to S&OP planning, involves setting intermediate goals based on input from multiple parts of the company. In particular, the sales, operations, and finance departments should offer information that helps Zaff set a plan for the company. Sales and operations planning is particularly helpful for companies that are trying to meet seasonal demand, such as Zaff's. To help Zaff with sales and operations planning, let's look at the five common steps in the sales and operations planning process.

Data and Planning

Zaff knows that he wants to use sales and operations planning to help him with the ups and downs of demand his company faces during the year, but where should he start? Step one of the S&OP planning process is data collection, or gathering information from different department of the company. This could include things like former and current sales trends or information about customers. This step ends with an automated statistics-based forecast of what the company should do. For example, Zaff's company might end up with a statistics-based forecast of how many tents they will sell in each month for the next year.

Step two of the sales and operations planning process is demand planning, which involves making a forecast of what the sales cycle will likely be over the intermediate term. In this step, the automated forecast from step one is examined and combined with human knowledge and analysis to produce a revised forecast. Once a company has their revised forecast, they move on to step three of the planning process.

This involves sales planning, or comparing capacity and demand. Capacity is the demand that the company is currently able to meet, based on manufacturing and inventory. For example, if Zaff's company has 10,000 tents in a warehouse and they can make 5000 more this month, then their capacity is 15,000 tents. By the end of sales planning, Zaff will want to know what the gap is between capacity and demand. What if their capacity is 15,000 tents, but their demand this month is 30,000 tents? Then they have a problem.


So far in the process, Zaff has looked at a lot of data and come up with some important analyses based on that data. But now, he has to have a series of meetings to take those analyses and put them into a plan of action.

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