Sales and operations planning (S&OP) and sales and operations execution (S&OE) are related processes in supply chain management. However, they differ in their goals, focus, and time horizon. Let’s go over the basics of each process and elaborate their differences. We’ll also discuss recent trends toward modifying, combining, or eliminating these business functions.

What is S&OP?

Sales and operations planning is a longer-term data analysis and planning process generally focused on the period from 3 to 18 months out, though some forecasts may reach out to 2 or 3 years. S&OP may be generally focused on the broader supply chain and more inclusive product categories, with the goal of achieving flawless balance between demand and supply. Since a lot of analysis and preparation are required for effective planning, S&OP meetings are typically held no more frequently than once a month.

What are the key steps in the S&OP process?

Different organizations may add steps or make modifications to the following, but in general, S&OP involves (at a minimum):

• Gathering and analyzing data: Ideally, smart solutions should be employed here to improve accuracy and streamline workflow
• Demand planning, including a product review: Based on data gathered and analyzed, a coherent demand forecast is produced
• Supply planning and inventory projection: Based on the demand plan and forecasts, supply planners attempt to exactly meet the projected demand, with specific KPIs and goals identified
• Review and reconciliation (also called Pre-S&OP, or “the meeting before the meeting”): Team leaders and S&OP owners meet, review the data and plans, and identify any areas of concern that need to be addressed with company leadership
• Presentation / finalization of plan and implementation (Executive S&OP): The reviewed plan is presented in a collaborative meeting with company leaders, and any issues in need of input or approval by the Executive team are brought to light. Any necessary revisions to the plan are identified at this time, with specific deadlines for those revisions

For further details on each step of this process, see our full article on S&OP.

What is S&OE?

Sales and operations execution traditionally focuses on nearer-term analysis, plan revisions, and putting plans into action for the next 0 to 3 months. S&OE helps businesses implement the steps of the S&OP plan through monitoring and adjustments of operational activities in real time. While S&OP teams generally meet on a monthly basis, S&OE meetings are typically held weekly. In general terms, the S&OP process focuses on the entire supply chain and wider product categories, while the S&OE can be said in some cases to have a narrower focus, down to specific product SKUs or on identifiable disruptions to individual portions of the supply chain.

What are the key steps in the S&OE process?

As with S&OP, the steps and functions involved with S&OE can vary widely depending on whom you ask. However, in general, S&OE will involve the following in some form:

• Demand review: Analyzing current and forecasted demand based on sales data, market trends, and customer feedback to help ensure more accurate projections
• Supply review: Evaluate current inventory levels, production capabilities, and resource availability to determine the deliverables necessary to accurately meet projected demand
• Gap analysis: Identify any discrepancies between supply and demand. This includes determining if there are shortfalls or excesses in inventory or capacity. In effective S&OE, gap analysis can also incorporate identifying specific discrepancies or breakdowns between large-scale tactical plans and day-to-day operations or necessary functions to achieve larger goals
• Collaboration and action planning: Engage cross-functional teams (sales, operations, finance, etc.) to discuss plan review findings and collaboratively develop action strategies to address any gaps. For example, this may include adjusting production schedules, reallocating resources, hiring temporary workers, or implementing high-priority or emergency promotional strategies based on immediate supply or demand requirements
• Execution and review: Implement the agreed-upon plans while continuously monitoring progress to ensure alignment with objectives, making adjustments where necessary based on real-time information. The goal should be continuous improvement and refinement of the S&OE process based on feedback and performance

Should S&OE be combined with S&OP or otherwise eliminated?

Just as the S&OP process was defined in the 1980s and has had to become somewhat flexible or more inclusive in its definition over the past 40 years, some business thinkers today opine that the S&OE process should also be either redefined or replaced by more efficient strategies, or at least more inclusive, holistic business management practices. Some argue that the traditional separation of the S&OP and S&OE processes can lead to inefficiencies due to information lags and compartmentalized or siloed data or functions.

Certainly, any dogmatic adherence to practices that create or facilitate inefficiencies should be eliminated. However, a more inclusive redefinition can often suffice. For example, the S&OE step “demand review” could accurately be stated to be part of any effective “demand planning” step in S&OP. Similarly, a broad definition of the S&OP step “review & reconciliation” could technically encompass multiple S&OE steps including gap analysis, collaboration/action planning, and continuous review and improvement. These last functions should naturally be part of any effective, modernized S&OP plan anyway. Certainly the most recent, more expansive definitions of the S&OP process can and should involve these functions.

But, as discussed in our article on integrated business planning (IBP), there is a growing trend in today’s businesses toward incorporating or revising what may be considered traditional S&OP into a more holistic, “one consensus plan” IBP process. Ideally, IBP should account for every aspect and function covered by both S&OE and S&OP. However, for many business leadership teams, a comprehensive, Big Picture plan is not often achievable (and certainly not actionable) without breaking it down into specific steps, processes, and deliverables. So, until maximum streamlining of business planning is achieved, it may be more useful to think of S&OE as a defined, goal-oriented task, a necessary component of S&OP, and similarly to think of S&OP as a necessary component enabling effective IBP.

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