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S&OP Step by Step

By Jenny Schneider | September/October 2013 | 23 | 5

An effective S&OP process often takes time to discover. Following are some fundamental strategies, concepts, steps to follow, and lessons learned I have discovered in my career. With any luck, these reflections can contribute to the development or maturation of your own S&OP activities.Arrive at leading practices and a winning strategy

When I started out in my current role, I relentlessly pursued S&OP best practices. I wanted to know exactly how other companies do the process. I found plenty of theory, but my discoveries did not give me enough specific information. I wished someone would just tell me what they do and how they do it. I had so many questions: Who attends your meetings? When and where do you hold them? How long are they? What do you talk about? What are the most valuable outcomes?

So I hope APICS magazine readers find value in me introducing myself as the new author of this department by sharing what I have discovered to be an effective S&OP process. I have included my fundamental strategies, concepts, steps to follow, and lessons learned. Does this mean it’s the right process for you? Perhaps. Or maybe there is a portion that will be helpful. Either way, I am optimistic that these reflections can contribute to the development or maturation of your own S&OP activities.

The basics
First, let’s discuss participation. Engage all business functions—most importantly, the leaders of finance, human resources, marketing, materials, operations, product management, and sales. Scheduling time to get everyone involved can be difficult, but it is essential to the success of the process. Make sure people recognize that S&OP is not just a bunch of extra work; rather, it’s an integral part of their responsibilities. Management should view the process as an avenue to effectively running the business and determining what levers should be pulled in order to better meet customer expectations.

The process should be facilitated by the S&OP manager and team. I use the term “facilitated” because, often, a company’s S&OP manager will take too much responsibility for the forecast (for example, making changes to it without consensus) and either end up owning it entirely or causing others to see it that way. This can be a very dangerous perception. If the business leaders do not own the forecast, engagement falters, and you end up working to revive your S&OP process instead of taking it to the next level.

By focusing S&OP on expectations, the meetings will run more efficiently and be completed in one-to-two hours, depending on the phase. Meetings should be executed at least monthly. Many industries will need to get together more frequently—but anything longer than monthly, and you can miss out on market trends, new customer information, and supply chain requirement updates.

Modeling the process
Step 1: Demand. Receiving updated information on a monthly basis is the most important aspect of this step. The goal is to get data on cannibalization, new families, the forecast, and the like in time for the next demand meeting.

Day 1 is spent on data preparation. The S&OP team organizes the information that will be used to kick off the S&OP process. Team members are responsible for creating a baseline forecast and verifying that there are no anomalies.

On day 3, team members gather field intelligence. Depending on the sales structure, you may need multiple levels of forecast review. A good practice is to make sure that sales personnel closest to the customers provide the field intelligence for the forecast first. Adjustments will be made based on recent ordering patterns, orders in the pipeline, promotions, market indicators, and comparisons to prior months or years. This should take no longer than one hour of individual time. If you have a superior forecasting package to house the information, then it could take even less.

Focus should be on the near future (but beyond the time fence), and the forecast should be unconstrained (annual goals are not a factor). Also, reviewing the forecast in dollars or some other unit of measure does not really matter—meaning, don’t force salespeople to forecast units if they talk dollars, otherwise you will struggle with an inaccurate forecast for years. Find the key to converting the forecast from “sales speak” to operations. Typically, a forecast can be converted to units via a simple average sales price.

Day 7 is when the demand meeting takes place. Team members review the forecast and include the regional or higher-level managers from sales, product management, and marketing. The S&OP team should facilitate the meeting and keep it under two hours. The objective is to modify the field intelligence forecast (if needed) and approve a final demand forecast. Again, this is an unconstrained forecast—changes should be based on data from customer and market intelligence, product sales initiatives, programs, promotions, new product launches, and project demand in the pipeline. Review the forecast, and focus on exceptions. If there are any major issues, escalate them to the partnership meeting (see step 3).

Step 2: Supply. Days 11 through 15 are for the supply meetings. I have found the most efficient method is to let each plant conduct its own gathering. Typically, these should take one hour and be facilitated by the master scheduler. Attendees include representatives from finance, materials, and operations, and the aim is to review the plan, compare it to demonstrated capacity, and perform a rough-cut capacity analysis. This will help you identify any potential constraints with machinery, people, or suppliers and develop a supply plan and countermeasures.

It is very important to note that supply meetings should be focused on constraint resolution and not “why we don’t believe the forecast.” If there are legitimate concerns or possible constraints, raise these to the partnership meeting. Leaders set the expectation that the forecast is based on field intelligence and should not be disregarded because of recent bookings or feelings.

Step 3: Partnership meeting. The partnership meeting occurs on day 16. Organization leaders are responsible for the effectiveness of this two-hour meeting, which should be viewed as a working session. The finance, marketing, materials, operations, product management, and sales leaders are in attendance, with the gathering being facilitated by the S&OP team. The goal is to develop a partnership plan that is a statement of commitment by the organization. This strategy is used to develop the financial forecast, resulting in a single set of numbers. Both are reviewed and approved during this meeting. In addition, the partnership meeting should enable

review and approval of the forecast (in dollars and units of measure)
evaluation of performance measures
analysis of the financial impact and the gap between it and the company’s annual operating plan
identification of action that can be taken to balance demand and supply
resolution of constraints and escalations.

It is very important to make this a functional meeting—one that becomes a strong foundation for approving and resolving escalations and identifying opportunities for continuous improvement to the S&OP process. If leaders of the functional groups do not feel ownership, they should reexamine the meeting as a whole and collect feedback from participants on how to make the gathering more effective. One strategy is to perform a kaizen—an effective tool for improving any process.

Step 4: Executive meeting. Day 18 is for the executive meeting. The president or CEO of the organization owns and directs this one-hour gathering. Your business structure will dictate who should be in attendance. Sometimes it is the same participants as the partnership meeting, plus the president and someone from human resources.

The meeting is facilitated by the S&OP team. Based on the data and escalations presented at executive review, participants must understand and react to any misalignment with the annual operating plan, escalation resolution, and preparation for seasonality and market shifts. The executive meeting should promote a team environment but encourage healthy debate. The critical objective is to approve one set of numbers—meaning, finance, operations, and sales are in concert. This puts in motion the required activities outlined in previous meetings to achieve the forecast.

S&OP can reap huge rewards or cause huge headaches. The first step to ensuring success is having a process with agreed-upon timing and objectives. Follow standard operating procedures, schedule meetings six months in advance, and be vigilant at identifying struggling elements before they fracture the process. The best S&OP leaders create a culture that leads to one concise plan and great transparency.

Jenny Schneider is the sales, inventory, and operations planning manager for Ingersoll Rand’s Security Technologies Sector in the Americas. She also is the regional materials manager, responsible for leading materials strategy, planning, and control. Schneider is a Certified Six Sigma Black Belt. She may be contacted at jenny_schneider@irco.com.

Editor’s note: The editors of APICS magazine are pleased to welcome Jenny Schneider to our pages as the new “Sales and Operations Planning” (S&OP) department author. Schneider works for Ingersoll Rand’s Security Technologies Sector in the Americas, acting as the manager of sales, inventory, and operations planning (SIOP)—a method that adds an inventory optimization step to the traditional S&OP process. She is responsible for the development of highly effective monthly SIOP.


  1. Antto Pajulahti March 02, 2015, 08:02 AM

    Excellent sum up. In the end S&OP is all about common sense and cooperation, but still so many get it wrong. I truly like how you describe this term "facilited". Could't agree more.

    I provide practical S&OP and IBP Consulting and education services, so everyone is free to contact me to get more thoughts about this topic.

    Best Regards Antto Pajulahti. www.pajulahti.cc

  2. Goda October 27, 2014, 04:03 AM

    Dear Jenny,

    I am particularly in Sandra's question: 'how do you show numbers for supply planning? Do supply planning make an MPS run with these numbers?

    Thanks. Goda


  3. Krishna October 13, 2014, 12:22 PM
    Hi Jenny,

    Its a great article. Just one query. At what level these calculations happen in S&OP process ? Product / Product family / Brand etc. I understand that S&OP is primarily 2 to 18 months plan. In such case, will it makes sense to plan at SKU level ? if not, when exactly should the disaggregation be made from product family to the SKU level ? Such disaggregation should also need to go through S&OP process ?

  4. Bishnu Mohanty July 17, 2014, 10:10 AM
    This is really a very very clearly articulated writeup which gives a very transparent picture of S&OP. Particularly very helpful for people who want to get an overview of this process. 
  5. Bishnu Mohanty July 17, 2014, 10:09 AM
    This is really a very very clearly laid out article which mentions the steps in a very transparent way. Great overview for people who want to understand the nitty gritties of S&OP process. 
  6. Sandra April 06, 2014, 09:09 PM
    Hi Jenny, I found you article very interesting, I am demand planner and we apply all 4 steps. I have a doubt about step #2 Supply: how you show the numbers for supply planning? Do you show a new forecast in volume or in value? Do supply planning make an MPS run with these new numbers?

    thanks for you help.

    Sandra Paola Torres
  7. Eric February 19, 2014, 07:38 AM
    Hi, grate report, I would like to know the best practice or standar in order to generate "canibalization" process.

    Thank You.