Must Know Sales And Operations Planning Basics To Better Balance Supply And Demand

If you plan on owning and operating your own business in the future, you do not need a business degree from a prestigious school like Harvard Business School. However, there are some basic business concepts that you absolutely need to know. Otherwise, you will have no success running a business. Sales and operations planning, fondly referred to as S&OP, is one such concept. Once you know how to form an LLC, you should start learning about this type of tactical planning for business. No business can run without operations and sales. If you want to learn all about sales and operations planning, what it is and the best practices you need to know to succeed, keep reading.

What Is S&OP?

Sales and operations planning involves the process of reviewing sales projections and their potential financial impact. For large, public companies,  S&OP requires executive management to meet and conduct the review to make decisions based on their findings regarding future business plans. In a small business setting, sales and operations planning may only involve one one or two individuals. This process can also be referred to as aggregate planning. Regardless of what industry a business operates in, effective sales and operations planning makes it easier to grow and succeed.

Why Plan Sales And Operations?

Aggregate planning has a considerable number of benefits for businesses that choose to take advantage. Sales and operations planning gives a business better insight into supply and demand for all of its products and services. This helps to improve inventory management practices. It also allows business owners to improve the accuracy of their budget forecasting calculations. Overall, a business’s entire product lifecycle management process can be improved with proper S&OP strategies. These advantages are quite substantial for all types of businesses.

Top Down Plans

Top-down sales and operations plans are the easiest type of S&O plans for business owners to implement. This is particularly true for those business owners who have not previously utilized sales and operations planning strategies. This type of sales and operations plan is developed entirely based on a single sales forecast. That sales forecast is used to devise the best tactical plans for business in the year to come. The simplicity of top down planning helps make it possible for all types of business owners to implement sales and operations planning processes at their company.

Bottom Up Plans

Bottom-up planning is used by company’s who cannot use a sales forecast for accurate resource planning. These bottom-up S&OP plans offer a better solution for companies with an erratic manufacturing schedules. Bottom up sales and operations planning is also useful for companies who have an ever-changing number and variety of goods offered from month to month. For those types of businesses, top down sales and operations planning is not appropriate. Sales forecasts are simply not helpful resource planning tools for them. This is important to note, just in case this is the type of business you opt for in the future.

Do It Yourself

S&OP strategies should be managed by the business owner themselves. If this is not an option, only high-level executive management should be responsible for these tasks. Sales and operations planning is an incredibly sensitive area of business that can have consequential, resounding impacts in all areas of business operations. It is very important that it is managed by strong, effective leadership. Aggregate planning processes require striking a balance between supply and demand, which is incredibly difficult to do. These are the types of business decisions that only the business owner, CEO or General Manager have the knowledge and ability to make.

If you hope to open a business in the future, you need to know the importance of sales and operations planning, perhaps even better than you know the LLC publishing requirements in your state. S&OP strategies make it possible to create effective tactical business plans that help a company grow and succeed. Bookmark this post as a resource to refer back to when you finally get a chance to start your own business. You will definitely want to implement these planning tactics as soon as you can.

Photo from http://www.industryweek.com/planning-amp-forecasting/supply-chain-basics-utilizing-planning-process-optimize-business-performanc

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