Tools to support sales and operations planning (S&OP)


With growing interest in sales and operations planning (S&OP), it seemed appropriate to discuss the tools required to support S&OP in the midst of today’s market dynamics.

Scenario Management
Tools to make it easy for users to create, evaluate, and compare multiple scenarios. In addition, these tools automatically identify essential participants and invite their input by asking them to either collaborate on the creation of the scenario or agree to the consequences of the proposed action. For example, a supplier may agree to ramp up production of a component for a new product early because the sales numbers are trending above plan, and the inventory manager may need to agree to holding increased inventory of the component even though it increases risk.

Financial Measures

The operational objectives set by executive management are almost always expressed in financial measures such as gross margin, cash-to-cash cycle, economic value-add, or similar categories. The best tools can readily convert the unit-based view of the users into financial measures that are relevant to executive management. If standardized measures do not suffice, the tool should also provide workbook capabilities that allow users to develop additional measures specific to their organizational needs.

In addition, solutions need to offer scorecarding features that enable users to rank financial measures and compare them across various scenarios. This provides an objective way of determining the best set of scenarios to include in the executive review during the S&OP process.


The ability to track key performance indicators (KPIs) within the S&OP cycle is critical to effective S&OP adoption. Tools need to provide early warning that certain KPIs are projected to exceed tolerance levels, allowing the organization to take corrective action before problems arise.

In addition, while a supply order may arrive only one day late (which may be within tolerance from a supplier management perspective), the consequence could be that a major new order will be delivered late or, even worse, lost. This in turn might mean a downward trend for gross margin. Through these tools, such an occurrence would cause an alert to be sent to a senior manager, allowing him or her to take appropriate action.

More importantly, there could be several small changes at the operational level, each of which is within tolerance and therefore does not generate alerts. However, the cumulative effect of these changes could be, say, a 5 percent drop in revenue for the quarter—large enough to warrant executive attention. Alerts can help companies better track and effectively respond to such situations by eliciting attention before a crisis occurs.

Management by Exception

Closely related to alerting is the capability to drill down to the exceptions that cumulatively cause a particular KPI to trend out of tolerance. In the example above, the executive could identify all sales regions in which the projected sales revenue is below target. These could easily be ranked in order, allowing the executive to identify rapidly the regions on which to focus.

When contrasted to the common approach adopted by many companies in similar situations—i.e., ad hoc analysis and data extracts using spreadsheets—the increased productivity and effectiveness afforded by tools are readily apparent.


The diverse capabilities provided by best-in-class tools provide an ideal mechanism to enable far more effective sales and operations planning for virtually any organization.

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