Supply chain management

PGE-M5-OPS-602-E-L-BOD-M1

Introduction to S&OP
(Sales and Operations Planning)

Yann BOUCHERY

Associate Professor in Operations Management

& Logistics
Objectives of S&OP

https://www.linkedin.com/feed/update/activity:6496739996924461057/

© Yann Bouchery, KEDGE Business School 2

 S&OP (Sales & Operations Planning)

APICS definition:
"function of setting the overall level of manufacturing output […] to best satisfy the
current planned levels of sales […], while meeting general business objectives of
profitability, productivity, competitive customer lead times, etc., as expressed in the
overall business plan.”

The answer to the question:

How do we match supply and demand?

© Yann Bouchery, KEDGE Business School 3

S&OP (Sales & Operations Planning)

S&OP is an aggregated plan at the tactical level:

• Made per product families

• Made for the next 6 to 18 months

• Reviewed and updated every month

• Validated at the executive level of the company

• Discussed by several departments within the company

© Yann Bouchery, KEDGE Business School 4

Product families
Products are grouped into main families
Avantages:
• This reduces the complexity of the S&OP process (less S&OPs to
discuss and validate)
• This increase the reliability of demand forecast (It is easier to
forecast the big picture than the details)

Issues:
• How do we group products in order to be consitent? (seasonality
patterns and production process)

© Yann Bouchery, KEDGE Business School 5

S&OP
An example
Month Dec Jan Feb March Apr May June July Aug Sept Oct Nov Dec
Sales forecast 45 15 20 150 120 88 20 10 50 80 90 80
Production 45 15 20 150 120 88 20 10 50 80 90 80
Inventory 20 20 20 20 20 20 20 20 20 20 20 20 20

Month Dec Jan Feb March Apr May June July Aug Sept Oct Nov Dec
Sales forecast 45 15 20 150 120 88 20 10 50 80 90 80
Production 64 64 64 64 64 64 64 64 64 64 64 64
Inventory 20 39 88 132 46 -10 -34 10 64 78 62 36 20

What do you observe?

How could we match supply and demand?
© Yann Bouchery, KEDGE Business School 6
Actions available in S&OP
Three categories of actions are possible:

Type 1: Adjust the capacity (production)

Type 2: Adjust the inventory level

Type 3: Adjust the demand

© Yann Bouchery, KEDGE Business School 7

Type 1: Adjust the capacity (production)

Reduce the capacity Increase the capacity

© Yann Bouchery, KEDGE Business School 8
Type 1: Adjust the capacity (production)

How could we adjust the production capacity?

• Hire/Fire some employees

• Modify the working hours (get more flexibility)

• Subcontract for getting additional capacities

• Invest in new production equipment (more, faster…)

• Train employees to have a more flexible workforce

© Yann Bouchery, KEDGE Business School 9

Type 2: adjust the inventory level (or backlog)

Built up inventory Use inventory

© Yann Bouchery, KEDGE Business School 10
Type 3: adjust the demand

Increase the demand Reduce the demand

© Yann Bouchery, KEDGE Business School 11
Type 3: adjust the demand

How could we adjust the demand?

• Increase/Reduce product price

• Plan extra marketing events/special offer

• Postpone/Advance the lauching of a new product

© Yann Bouchery, KEDGE Business School 12

Departments involved in S&OP

© Yann Bouchery, KEDGE Business School 13

S&OP in a picture…

https://www.eyeon.nl/sop/
© Yann Bouchery, KEDGE Business School 14
 Thank you for
your attention…
Yann BOUCHERY
Associate Professor in OM & Logistics
KEDGE BUSINESS SCHOOL
Office 1524, 680 cours de la Libération
33405 Talence Cedex - France
yann.bouchery@kedgebs.com
Tel.: +33 (0) 5 56 84 55 37