Regardless of their size, organizations are typically divided into different functions. Some functions may be more sales or marketing-oriented, while others are focused on optimizing resources to meet demand, such as production or distribution.
Imagine the potential success of an organization where these functions do not communicate effectively: the sales teams may end up promoting products that the company cannot deliver on time and in the required quantity, and the operational teams, driven by resource optimization, may prioritize internal efficiency over quickly satisfying market needs.
Integrated sales and operations planning (S&OP) serves as a planning exercise aimed at mitigating these effects and promoting alignment among various functions within an organization. It involves a planning horizon of 3-18 months and aims to create a unified plan that guides the company’s functions in the medium term.
From a historical perspective, this concept emerged in the business world in the late 1980s as a driver of competitiveness to ensure the success of MRP II implementations. The concept has evolved to consist of integrating a sales plan and a production plan.
However, recent trends challenge the ‘control’ imposed by a sales plan on operations departments and propose S&OP to be viewed synchronously – allowing for simultaneous optimization of resource utilization and selection of the most attractive demand segments to satisfy.
Despite this perspective, the level of implementation and adoption of S&OP approaches varies across sectors and organizations. To systematize these different stages of development, several authors have introduced frameworks that classify an organization’s maturity. Notably, Grimson and Pyke proposed a framework that categorizes a S&OP program maturity into five stages across five dimensions: Meetings and Collaboration, Organization, Measurement, Information Technology (which may include analytical decision support models), and Integration.
The same study presents a field survey of 15 companies, highlighting the challenges they face in achieving higher levels of maturity – the median maturity levels range between stages 2 and 3 across all the dimensions. New advancements are required to move in this evolutionary journey.
By: Daniel Pereira