Sales and Operation Planning: Practical Analysis Essay

Generally, Sales and Operation Planning (or S&OP) plays an important role in the organization’s supply chain performance. Large organizations pay much attention to planning in order to maximize efficiency and minimize costs. Tuomikangas and Kaipia (2014, p. 243) refer to S&OP as “a key business process to match customer demand with supply capabilities in the medium term.” This goal is attained by providing a tool that aligns the general business strategy with operational planning and matches demand with supply plans. According to Tuomikangas and Kaipia (2014, p. 243), S&OP plays a crucial role in supply chain management and improves an organization’s overall competitiveness by responding to its customers’ demands in the most efficient way. Belotti et al. (2017, p. 1) add that the strategy in question “unites different business plans in a single integrated set of plans.”

As companies consist of several departments, management might find it challenging to ensure cooperation between all of them. Sales and production are two fundamentally different areas, which do not always align within one particular enterprise. According to Ambrose, Matthews, and Jones (2018, p. 270), these departments tend to “occupy different thought worlds.” In other words, sales and production often follow separate views on business, causing disharmony in the company. Such a gap between departments might be detrimental to the organizations’ overall revenues, so the situation requires some bridge. S&OP serves this particular purpose, as it aims at ensuring proper coordination between divisions. Therefore, nowadays, managers pay more attention to this instrument, recognizing its potential.

In fact, intergroup cooperation is a complex process that requires more in-depth research. Ambrose, Matthews, and Jones (2018, p. 271) highlight a connection between professional groups and social identity. Social categories comprise a range of associations, such as age group, religious community, and organizational membership. As for business relations, according to Ambrose, Matthews, and Jones (2018, p. 271), “employees tend to form strong identities with their functional subunit and negative predispositions toward other subunits.” Stated differently, people who work in one department may be reluctant to communicate closely with those who represent a different subgroup. Since each division tends to have its separate objectives and incentives, such disharmony impedes proper S&OP functioning and requires special attention from the management. Ambrose, Matthews, and Jones (2018, p. 271) refer to studies, which indicate that superordinate identity, or commitment to goals that overarch those of a particular group, is a pivotal element of Sales and Operation Planning. Therefore, overcoming differences that exist between the company’s divisions is an indispensable factor that contributes to positive change.

Ideally, the correct implementation of S&OP entails a range of benefits for the company. According to Tavares et al. (p. 360), it allows the management to “achieve competitive advantage on a continuous basis.” As stated by Hulthén, Naslund, and Norrman (2017), this strategy synchronizes the organization’s strategic goals and operations. As a result, the decision-making process becomes coordinated and uses overall performance as a foundation, rather than ambitions. S&OP leads to an efficient allocation of resources, thus reducing production costs and providing customers with the best value. Therefore, Sales and Operation Planning is a pivotal factor in customer satisfaction combined with cost reduction.

On the other hand, it is important to consider the barriers to Sales and Operation Planning procedures, together with its benefits. As Pedroso, da Silva, and Tate (2016, p. 216) state, “existing procedures in organizations, traditional and high rigidity often impede the process.” Indeed, as was mentioned above, large organizations comprise inherently different departments, and people working there might have opposing views on the current state of the business. Moreover, the company in question might be following procedures that are not much compatible with Sales and Operation Planning. In this case, eliminating the impediments is required, along with adopting new methods of conducting business affairs, as it would allow the company to meet the demands of the changeable market in an efficient way. Pedroso, da Silva, and Tate (2016, p. 216) add that constant information flow must be ensured within the organization, as it ensures proper functioning of cooperation mechanisms that are required for S&OP implementation.

As a matter of fact, any scenario of the S&OP implementation process requires significant changes in both business processes and the company’s structure. Pedroso, da Silva, and Tate (2016, p. 216) say that, before initiating adoption of S&OP, any company is advised to “leverage some key success factors, such as culture and values, business processes, information, and systems, organization, as well as metrics.” All of that is necessary to ensure proper cooperation on all levels. Tuomikangas and Kaipia (2014, p. 244) state that, as far as supply chains are concerned, coordination consists of making decisions that enhance the efficiency of the chain. The latter is attained by careful examination of the market and customers’ needs and transmitting this information to the production department.

The concept of S&OP has seen much managerial attention in recent years, which enables practical evaluation of its efficiency for overcoming the issue of conflicting objectives between functions within the business. Pedroso, da Silva, and Tate (2016) conducted research regarding S&OP implementation in a range of Brazilian companies. The authors examined organizations according to several criteria: they have either succeeded in S&OP implementation and got results or “had documented evidence of enablers for a successful S&OP implementation” (Pedroso, da Silva, and Tate, 2016, p. 217). Besides, companies with a higher level of structural complexity were analyzed. The names of the companies were disguised, as to preserve their data confidentiality, and replaced by Wood, Ground, and Metal. According to Pedroso, da Silva, and Tate (2016), these organizations are considered leaders in their respective markets. Such a choice of research subjects makes it possible to draw meaningful conclusions concerning the matter at hand.

The study required a large amount of communication with employees that represent different divisions, which highlights the cross-functional essence of Sales and Operation Planning. Pedroso, da Silva, and Tate (2016) gathered the data from 15 managers of all three companies, which included the prime coordinators of S&OP implementation in all cases. Interviews allowed the researchers to get an insight into S&OP enablers and managers’ ways of dealing with impediments along the way. The study brought results in the form of a list of facilitators and barriers, some of which turned out to be similar across all three organizations, meaning that they can be considered critical conditions. As for the enablers, all three companies demonstrated the presence of S&OP from the top management, cross-functional integration, and performance evaluation. At the same time, Wood had the largest number of enablers that were present in the case of the other companies, which included accurate business forecasts, process impartiality, and a separate S&OP department. Subsequently, Wood managed to obtain the best results over a shorter period, which is an excellent example of proper implementation.

Nevertheless, as discussed above, S&OP adoption is rarely possible without some impediments. All three firms reported that they had particular difficulties, siloed culture being the most substantial barrier in all cases (Pedroso, da Silva, and Tate, 2016, p. 222). This term refers to the aforementioned tendency, according to which separate divisions are not eager to openly communicate and cooperate with other professional groups within their organization. This is the only barrier that was present in all companies; therefore, it demonstrates how relatable the issue of siloed culture and miscommunication is for business nowadays. In the case of impediments, Wood once more showed the fewest number (Pedroso, da Silva, and Tate, 2016, p. 222). This company represents a role model for Sales and Operation Planning implementation in a complex environment, which is supported by the fact that it adopted the strategy only four years prior to the study in question. Apparently, the success was possible due to specific features of the company, such as strong discipline and positive reaction to changes from the employees. These findings illustrate the role of various enablers and barriers when implementing S&OP in similar caliber companies.

All in all, Sales and Operation Planning proves to be an efficient instrument of increasing the company’s productivity and revenues. At the same time, it is highly dependent on intergroup communication within the organization, which is one of the prime barriers that companies willing to implement S&OP face. There is also a list of enablers that allow for a smoother implementation of Sales and Operation Planning due to pre-existing advantages. S&OP can have a significant positive impact on an organization, but it requires thorough preliminary research and an unprecedented level of communication between departments to be successful.

Reference List

Ambrose, S. C., Matthews, L. M. and Jones, R. (2018) ‘Cross-functional teams and social identity theory: a study of sales and operations planning (S&OP),’ Journal of Business Research, 92, pp. 270–278.

Belotti, C. et al. (2017) ‘Proposal of a model for sales and operations planning (S&OP) maturity evaluation,’ Produção, 27, e20170024.

Hulthén, H., Naslund, D. and Norrman, A. (2017) ‘Challenges of measuring performance of the sales and operations planning process,’ Operations and Supply Chain Management an International Journal, 10(1), pp. 4–16.

Pedroso, C. B., da Silva, A. L. and Tate, W. L. (2016) ‘Sales and operations planning(S&OP): insights from a multi-case study of Brazilian organizations,’ International Journal of Production Economics, 182, pp. 213–229.

Tavares Thomé, A. M. et al. (2012) ‘Sales and operations planning and the firm performance,’ International Journal of Productivity and Performance Management, 61(4), pp. 359–381.

Tuomikangas, N. and Kaipia, R. (2014) ‘A coordination framework for sales and operations planning(S&OP): synthesis from the literature,’ International Journal of Production Economics, 154, pp. 243–262.