28 ASCET

Enabling Sales and Operations

Planning Through Technology
Dr. Larry Lapide, Massachusetts Institute of Technology

Successful sales and operations planning requires committed, step-by-step process

changes to fully leverage software applications.

T he sales and operations planning (S&OP) process has been

around for decades. I have discussed it in most of my presenta-
tions on demand planning and forecasting since the mid-1990s and
have been polling audiences along the way. One-third of the early
audiences were composed of individuals from companies that had
implemented S&OP, while for recent audiences the number has been
hovering over 80 percent. Clearly the S&OP process became more
prevalent over the last decade or so, with a crescendo of interest in
the last few years.
An indicator of the interest in the S&OP process is the fact that,
according to AMR Research, companies have spent around $12
billion in supply chain planning application software over the last
six years. Yet while spending significant sums of money on S&OP-
related software, they were not seeing the benefits they expected
because many did not change the process to fully leverage the
enabling technology.
This article provides a blueprint for helping companies improve
their S&OP processes. It covers the ideal process to evolve toward,
the enabling technologies needed and a four-stage maturity model
developed to help companies diagnosis their as is S&OP process-
es, as well as to help them develop a road map for achieving their
to be processes and technologies.
The Ideal Process
There are a dozen aspects of an ideal S&OP process. While they
can never all be executed to the fullest extent, they represent an ideal
process toward which companies should evolve, yielding improving
supply chain performance. These aspects are summarized below.
(More detail can be found in my article Sales and Operations
Planning, Part I: The Process from The Journal of Business
Forecasting [Fall 2004]):
1. Ongoing routine S&OP meetings: A key aspect of an S&OP
process is that it is comprised of routine meetings. Three types
of meetings are often held. The first establishes an unconstrained
demand plan and forecast; the second meeting develops rough-
cut supply and constrained demand plans; and the third finalizes
the alignment of the demand and supply plans.
2. Structured meeting agenda: S&OP meetings should follow a
fixed agenda in a pre-specified amount of time that starts
with a review of previous plans and ends with a consensus-based
alignment of demand and supply plans.
3. Pre-work to support meeting inputs: The baseline demand
forecasts and rough-cut demand and supply plans are inputs that
need to be aggregated, synthesized and translated for managers
prior to all meetings.
4. Cross-functional participation: Multifunctional attendance
and participation during S&OP meetings is critical. Each member
needs to represent his/her functional areas perspective and rou-
tinely show up or send a proxy.
5. Participants empowered to make decisions: Participants in
the S&OP process need to be empowered by the executive team
to make decisions based on their beliefs and interactions with
other participants during meetings.
6. An unbiased, responsible organization to run a disciplined
process: The S&OP process needs to be organized and run by a
responsible organization, with the charter to schedule and run a
disciplined process.
7. Internal collaborative process leading to consensus and
accountability: A collaborative process that leads to consensus-
based plans is required. Process participants need to be able to
quickly create, review and revise plans.
8. An unbiased baseline forecast to start the process: Since a
baseline demand forecast forms the working draft from which
S&OP participants develop final demand and supply plans, it
should be unbiased, unconstrained and incorporate all known
impacts to future demand.
9. Joint supply and demand planning to ensure balance:
Often demand plans are set in place before the S&OP meetings,

Dr. Larry Lapide is the project director for MITs Supply Chain 2020 Project, a multiyear research effort looking into the future of logistics and supply chain
management. He is a recognized leader in supply chain technology and a frequent presenter at supply chain events. Dr. Lapide has written numerous
publications including his co-authorship of a Council of Logistics Management book, E-Business: The Impact on Supply Chain and Logistics. He was
profiled in 2001 by Supply Chain Technology News magazine as one of four top thought leaders in the supply chain arena. He was most recently VP
and service director for supply chain strategies, VP of research operations for business applications and GM for benchmarking services at AMR Research.
He holds a BSEE from The Cooper Union, an M.S. in E.E. from MIT and a Ph.D. in operations research from the University of Pennsylvanias Wharton
School of Business. Dr. Lapide can be contacted at llapide@mit.edu.

so meetings are focused on developing supply plans to meet
virtually inflexible demand plans. An S&OP process should
involve give and take between supply- and demand-side man-
agers, with final demand and supply plans jointly developed.
10. Measurement of the process: The S&OP process itself need to
be measured. Metrics should cover more than the typical fore-
cast errors, and should include measures such as variance to
baseline forecasts and budgets and the adherence to prior sales,
marketing and operations plans.
11. Supported by integrated supply-demand planning tech-
nology: Software applications to support S&OP should include
an integrated set of demand- and supply-side planning systems,
as well as workbench software that can support S&OP meeting
requirements.
12. External inputs to the process: Most S&OP processes in place
today are largely driven by internal demand and supply data.
However, to the extent available, information from co-managed
inventory programs such as vendor and supplier managed inven-
tories, collaborative planning, forecasting and replenishment,
and the sharing of downstream and upstream data can add
value and should be inputs into the S&OP process.
An indicator of the interest in the S&OP process is the fact
that, according to AMR Research, companies have spent
around $12 billion in supply chain planning applica-
tion software over the last six years.
The Need for Technology
First and foremost, one should recognize that software technology
in and of itself is not very useful. Without technology, however, a
business process like S&OP is cumbersome and cant support the
necessary scale to achieve its full benefits. Thus technology becomes
necessary, but not sufficient. Often, the S&OP process deals with a
large, complex set of needs that require a level of automation and
computational sophistication that goes well beyond what can be
achieved with manual processes merely supported by computer
spreadsheets.
Consider the planning needs of a typical Global 1000 manufac-
turing company. Its S&OP process might need to develop weekly
plans 12 to 18 months out for thousands of stock-keeping units that
are stocked and shipped from more than 10 distribution centers,
as well as plans for the component/material needs of more than
10 plants. There could be over 10 million planning elements that
need to be generated. Coupled with the fact that constraint-based
planning might need to be done using computationally-intensive
algorithms, it is often virtually impossible for the manufacturer to
support the S&OP process with spreadsheet technology alone.
The S&OP Technology Architecture
The S&OP process needs to be supported by three types of software
applications demand-side planning, supply-side planning and an
S&OP workbench. The components and the integrated supply-
demand planning technology architecture for these are displayed in
Chapter 1: Vision 29
Figure 1. They depict how the components need to be integrated
among themselves, as well as with other transaction-oriented busi-
ness systems such as ERP, manufacturing execution and material
requirements planning systems. The components for each of the
three types of software applications are described below:
1. Demand-side planning systems: These systems support the
development of demand plans and an unconstrained baseline
forecast that are used as demand-side inputs to the S&OP
process. The role of a demand planner system is to support users
in generating the baseline forecast and adjusting it based on
market intelligence. A demand collaborator system is used to
capture, assemble and process market intelligence gleaned from
a variety of sources, such as from field sales and marketing
personnel, as well as from downstream customers that share
their demand signals and are involved in co-management inven-
tory programs. To facilitate information collection from remote
locations and external sources such as customers, a demand
collaborator is usually Web-based so that information can be
transferred around the world.
2. Supply-side planning systems: These systems support the
development of supply plans that are used as the supply-side
inputs to the S&OP process. As such, they help to generate
the inventory, production and procurement plans to meet uncon-
strained baseline demand forecasts. Inventory management and
distributed requirements planning systems support users in
generating expected inventory replenishment of finished goods
warehouses, such as customer-facing warehouses and centralized
warehouses. In constrained supply environments, multi-facility
advanced planning and scheduling systems are used to produce
more accurate plans that account for limitations in plant and
distribution capacity, as well as for any short supply of compo-
nents, materials and other production resources. Inventory opti-
mizer systems support these types of systems by helping users set
inventory targets that optimally trade off customer service targets
against component, material, sub-assembly and finished goods
inventories. Lastly, supply collaborator systems are used to capture,
assemble and process supply capabilities from a variety of sources,
such as purchasing personnel and upstream suppliers (including
contract manufacturers). To facilitate information collection from
remote locations and external sources, a supply collaborator is
usually Web-based so that information can be shared.
3. S&OP workbench: This system supports two types of informa-
tion. First, the workbench needs to generate dashboards that
portray the planned supply versus unconstrained demand situa-
tions. These include supply-side metrics like expected plant uti-
lizations, production capacity shortages and critical component
shortages/surpluses, as well as demand-side metrics such as >>>
30 ASCET > > > Enabling Sales and Operations Planning Through Technology
expected unfulfilled customer demand and customer order
backlogs. The dashboard functionality also allows S&OP partici-
pants to quickly conduct what-if analyses of potential changes
to the supply and/or the demand plans. A second type informa-
tion that is needed during the S&OP process is how well the
process itself is performing. The workbench needs to generate
scorecards of key performance indicators that reflect how well
the S&OP process has been working, to foster learning and
improvements to the process over time.
As shown in Figure 1, the demand-side and supply-side planning sys-
tems need to be integrated and synchronized so that a change in
either the demand or the supply plans can be quickly reflected in the
overall supply-demand picture. The S&OP workbench also needs to
be integrated and synchronized with these and other planning
components so that any changes made in plans during or between
S&OP meetings can be reflected in the workbenchs supply-demand
picture as well.
All these systems are needed to support the ideal S&OP process.
However, the mix of systems required depends upon current and
evolving S&OP processes and these will vary greatly across com-
panies. It is the process changes that dictate the types of enabling
technology needed, since business processes dictate the enabling
technologies required for supply chain improvement.
An S&OP Maturity Model
The S&OP process at many companies is far short of the ideal. To
move closer, companies need to follow an evolutionary path. The
first step would be to assess the S&OP process as is. This as-is process
would then be compared to the ideal process. Last, a road map
would need to be developed identifying what gaps would be
addressed and when.
Maturity models are generally useful in going through process
change. Often the last maturity stage is practically unachievable;
hence, it becomes the ideal to which companies strive to achieve, as
well as is the benchmark over time against which to compare
Figure 1 The S&OP Technology Architecture
S&OP Workbench
Dashboards
Scorecards
Demand-Side Planning Supply-Side Planning
Demand Planner Inventory Mgmt/DRP
Demand Collaborator Multifacility APS
Inventory Optimizer
Supply Collaborator
ERP Systems Legacy Systems
MRP Systems Other Transactional
MES Systems Systems
progress. The S&OP maturity model is comprised of four stages
described below and depicted in Figure 2.
Stage 1: Marginal Process
Companies that have an S&OP process in Stage 1 have some type of
planning processes going, but they tend to be less formal and spo-
radic, and often display a chaotic nature. This type of process can be
viewed only marginally as a genuine S&OP process. Meetings take
place on a sporadic basis and even if they are pre-scheduled they are
frequently not high priority.
Also under this type of S&OP process there are disjointed plan-
ning processes taking place. Multiple demand plans are independ-
ently developed by the demand-side organizations for their own
operational planning purposes. There is little attempt to develop
demand plans that are consensus-based or that incorporate inputs
from other departments in the company. In addition, multiple sup-
ply plans might be independently developed by the supply-side
organizations with little effort given to aligning them with each other
or with the demand plans developed.
Companies with a Stage 1 process need to begin to move to
Stage 2 by first installing a more formal process that everyone agrees
to support and participate in, and one in which some attempt is
made to consolidate and harmonize the multitude of planning
spreadsheets various departments may have.
Stage 2: Rudimentary Process
Companies that have a Stage 2 S&OP process have formal planning
processes going on, but they are not fully participated in or inte-
grated. This type of process has some of the very basic or rudimen-
tary elements of an S&OP process. Meetings are scheduled and
routinely held. However, attendance is spotty. Under this type of
S&OP process the planning processes are interfaced. Multiple
demand plans are developed by the demand-side organizations;
however, they are shared.
Since the demand and supply plans are separately developed
each organization uses their own stand-alone enabling software
technology. Frequently, the demand-side organizations use a
demand planner system, the outputs of which are transmitted to the
systems being used by the supply-side organizations. Meanwhile the
supply-side organizations use multifacility advanced planning and
software applications to develop supply plans that are predicated on
the demand plans shared with them. The supply plans generated are
typically not transmitted to the demand-side systems.
Companies with a Stage 2 process can begin to move to Stage
3 by first getting executive management buy-in and then having
the executives ensure that S&OP meetings are taken seriously,
and that people are well recognized for their participation. These
companies should also begin to adjust both the demand and supply
plans during the S&OP meetings to move closer to consensus-based
integrated planning.
Stage 3: Classic Process
Companies that have a Stage 3 S&OP process have formal planning
processes that follow many of the basic elements of the ideal
process. This type of process has all the by-the-book elements of
an S&OP process. Meetings are routinely held and fully attended.
 Chapter 1: Vision 31

Figure 2 The S&OP Maturity Model

Stage 1 Stage 2 Stage 3 Stage 4
Marginal Process Rudimentary Process Classic Process Ideal Process

Informal meetings Formal meetings Formal meetings Event-driven meetings

Sporadically Routinely scheduled 100% attendance and Scheduled when someone

scheduled participation wants to consider a change
Spotty attendance or when a supply-demand
and participation imbalance is detected

Disjointed processes Interfaced processes Integrated processes Extended processes

Separate, disjointed Demand plans Demand and supply Demand and supply plans
demand plans reconciled plans jointly aligned aligned internally
and externally
Supply plans not Supply plans aligned External collaboration
aligned to to demand plans with limited number of External collaboration
demand plans suppliers and customers with most suppliers
and customers

Minimal technology Stand-alone Full set of

Applications integrated
enablement applications interfaced integrated technologies

Multitude of Stand-alone demand Demand planning An advanced

spreadsheets planning system
Stand-alone multi-
facility APS system
Systems interfaced
on a one-way basis
packages and supply S&OP workbench
planning apps integrated
External-facing
External information collaborative software
manually brought into integrated to internal
the process demand-supply
planning systems

Under this type of S&OP process the planning processes are inte-
grated so that demand and supply plans are aligned jointly by
demand-side and supply-side organizations. Rough-cut demand plans
are developed and brought into the S&OP meetings. In addition, sup-
ply plans are aligned to demand plans.
In more advanced Stage 3 processes collaborative information
drawn from a limited number of major customers about their future
demand needs is manually brought into the S&OP process. Possibly
collaborative information from a few critical-component suppliers
that highlight scarce materials might also be brought into the S&OP
meetings. In this stage the demand-side and supply-side systems
are integrated.
Companies with a Stage 3 S&OP process can begin to move to
Stage 4 by increasing the frequency of S&OP meetings and contin-
uing to increase and enhance their collaborative relationships with
suppliers and customers.
Stage 4: Ideal Process
A Stage 4 S&OP is a process that can never fully be achieved by any
company, but should be used as a benchmark for guiding the con-
tinual improvement of the process. S&OP meetings in this stage are
event-driven. They are scheduled on-demand only when someone
wants to change any of the existing plans or when a supply-demand
imbalance is detected. This implies that the process is supported by
systems that constantly keep track of supply and demand in real
time. Meetings would be conducted on a virtual basis so no one has
to travel, thus enabling a global process.
An advanced S&OP workbench system would support global
meetings. In Stage 4, processes are extended externally, so that col-
laborative information is drawn from most customers and suppliers
and enabled by demand collaborator and supply collaborator sys-
tems that are fully integrated to all the internal planning systems.
Using the Maturity Model
The S&OP maturity model should be used as a diagnostic tool
to improve planning processes and technology assessment. Users
should use the model to diagnose what stage their companies are
currently in with the caveat that many will overestimate their
current stage.
Comparing the current processes to the processes of the next
stage will identify the gaps that need to be closed over time.
Initiatives aimed at closing each gap should be analyzed on a
cost/benefit basis that accounts for the process and technology
changes needed. Based on the analyses, the company should then
develop a road map that specifies when each initiative would
be undertaken.
In Elusive Integration: Linking Sales and
Operations Planning, M. Eric Johnson
offers additional S&OP planning tools.