1. Demand planning:
Covers the process of creating and validating an unconstrained demand signal (Sales Forecast) 18-24 months ahead. It includes input from relevant participants from the commercial side.
After the sign-off, the forecast feeds two recipients: Supply to plan capacities and Finance to support financial planning and forecasting.
2. Supply planning:
The unconstrained demand signal is translated into a demand plan per factory, including “inter-company” requirements.
The supply situation (i.e. raw materials, capacity, inventory) is reviewed and gaps are identified. Options to synchronise the supply chain are identified and discussed.
3. Balancing and decisions:
All local plans are consolidated to get a global overview. Different what-if scenarios are analysed to support the overall risk assessment of the plan.
Based on the scenario evaluation, decisions are made and recommendations are presented to executive members.
4. Follow-up and communication:
Once the decisions have been made and final adjustments have been made to overall plan, the final committed plan is communicated and executed. This also includes a follow-up on decision-making and KPIs.
A well-established S&OP/IBP process is characterised by:
- A single consensus demand plan
- Look-out over a period of +18 months
- Cross-functional participation in S&OP – including finance
- A senior leadership-owned process
- Formal targets with accountability in place
- The proper discipline in the organisation to adhere to S&OP decisions – people execute according to what is decided
- The ability to reconcile demand and supply plans and identify gaps and imbalances
- The ability to conduct what-if modelling supporting S&OP decisions