Sales says they need more inventory. Operations says they're already overstocked. Finance wants to reduce working capital. Sound familiar?
S&OP exists to get everyone on the same page—literally working from the same plan.
S&OP Definition
Sales and Operations Planning (S&OP) is a business process that aligns sales forecasts with supply capabilities and financial goals. It brings together stakeholders from sales, marketing, operations, supply chain, and finance to create a single, agreed-upon plan for the business.
The output is a consensus demand plan that everyone commits to—and that operations can actually fulfill.
The Purpose of S&OP
Alignment Across Functions
Without S&OP, each department optimizes for their own metrics. Sales wants maximum inventory to never miss a sale. Finance wants minimum inventory to free up cash. Operations wants steady, predictable orders. S&OP forces these competing priorities into a single, balanced plan.
Proactive Decision Making
S&OP shifts the business from reactive ("we're out of stock, what do we do?") to proactive ("based on our forecast, we'll need to increase production in August"). Problems get solved before they become crises.
Better Resource Allocation
When everyone works from the same demand forecast, resources—inventory investment, warehouse space, production capacity—can be allocated efficiently instead of duplicated or fought over.
The S&OP Process
A typical S&OP cycle runs monthly, though faster-moving businesses may run it weekly.
Step 1: Data Gathering
Pull actual sales performance, current inventory levels, open purchase orders, and any new market intelligence. This becomes the fact base for planning.
Step 2: Demand Planning
Create or update the demand forecast. This combines statistical forecasts from historical data with input from sales and marketing about promotions, new products, and market conditions.
Step 3: Supply Planning
Assess whether supply (inventory, production capacity, supplier capacity) can meet the demand plan. Identify gaps or constraints that need to be addressed.
Step 4: Pre-S&OP Meeting
Working-level team members review the demand and supply plans, identify mismatches, and develop options for resolving them. This prepares recommendations for leadership.
Step 5: Executive S&OP Meeting
Leadership reviews the plan, makes decisions on key trade-offs, and commits to the final plan. This is where conflicts get resolved and resources get allocated.
Step 6: Execution and Monitoring
The agreed plan gets executed. Performance is tracked against plan, and significant variances trigger review and adjustment.
Benefits of S&OP
Improved Forecast Accuracy
When sales and marketing actively contribute to and commit to the forecast, accuracy improves. The forecast becomes a plan people believe in, not just a number from a spreadsheet.
Reduced Inventory
Better alignment between demand and supply means less need for safety buffers. You're not over-ordering "just in case" because everyone has confidence in the plan.
Fewer Stockouts
Problems get identified and addressed weeks before they hit. If a supply shortage is coming, the business decides in advance which customers or products get priority.
Better Customer Service
Consistent product availability builds customer trust. S&OP helps maintain the service levels customers expect.
Increased Accountability
When the whole leadership team commits to a plan, there's accountability for results. No more finger-pointing between departments when things go wrong.
S&OP for Mid-Market Brands
You don't need a 50-person planning team to benefit from S&OP. Even small brands can implement a lightweight version:
Weekly or Bi-Weekly Check-in: Review sales vs. forecast, inventory levels, and upcoming orders. Takes 30-60 minutes.
Monthly Deep Dive: Look further ahead, review forecast assumptions, and make bigger decisions about inventory investment or promotional plans.
Simple Tools: A shared spreadsheet or dashboard that everyone references. The tool matters less than the discipline of reviewing it together.
The key is consistent cadence and cross-functional participation. Even if it's just the CEO, head of operations, and head of sales in a room together, that's S&OP.
Common S&OP Challenges
Lack of Executive Sponsorship
S&OP requires decisions about trade-offs. Without executive participation, those decisions don't get made, and the process becomes a talking shop.
Gaming the Numbers
If sales is measured on forecast accuracy, they might sandbag forecasts. If operations is measured on inventory turns, they might understock. Align incentives with overall business outcomes, not functional metrics.
Too Much Detail, Too Little Decision
S&OP meetings that get lost in SKU-level details miss the point. The executive meeting should focus on strategic decisions, not granular data review.
Inconsistent Cadence
S&OP only works if it happens regularly. Skip a month, and you lose the rhythm. Problems that should have been caught early become fires.
Key Takeaways
- S&OP aligns sales, operations, and finance around a single plan
- The process typically runs monthly: data gathering → demand planning → supply planning → executive meeting → execution
- Benefits include better forecasts, lower inventory, fewer stockouts, and increased accountability
- Even small brands can implement lightweight S&OP with weekly check-ins and monthly deep dives
- Success requires consistent cadence and executive participation
Frequently Asked Questions
Q: What is S&OP?
Sales and Operations Planning (S&OP) is a business process that aligns demand forecasts with supply capabilities and financial goals. It brings together sales, operations, and finance to create a single, agreed-upon plan.
Q: Why is S&OP important?
S&OP gets everyone working from the same plan. Without it, departments optimize for their own goals, leading to overstocking, stockouts, and finger-pointing when things go wrong.
Q: How often should S&OP happen?
Most businesses run S&OP monthly. Fast-moving businesses may run a lighter version weekly. The key is consistent cadence—skipping cycles breaks the process.
Q: Do small businesses need S&OP?
Yes, even simple versions help. A weekly 30-minute check-in reviewing sales vs. forecast and inventory levels is lightweight S&OP that delivers real benefits.
Q: What's the difference between S&OP and demand planning?
Demand planning is creating the forecast. S&OP is the broader process that aligns that forecast with supply capabilities and gets organizational commitment to the plan.