Imagine you’re running an online grocery store. The marketing department puts raspberries on sale in July when they’re plentiful. Customers order them in droves. Problem is – no one told the warehouse in advance.
All of a sudden, four times the normal amount of raspberries arrives at the dock. The vendor’s packaging turns out to be flimsy, and every unit has to be individually repackaged. The warehouse muscles through, but it causes overtime and not all the berries get packed properly. Some customers complain that their raspberries arrived crushed.
The promotion should have been a hit, but instead the lack of communication caused stress and frustration among employees and customers alike.
A lack of communication between the sales and operations sides of a business can cause tensions. Sales & Operations Planning can help resolve this. S&OP, a common management practice, is a planning and decision-making framework designed to balance supply and demand. The process coordinates planning, promotes internal communications, and produces a sales forecast and product release schedule around which the whole company can organize itself.
Establish S&OP early – even before there’s much to plan – and keep expanding the process as your business grows. Building a culture where the sales/marketing/merchandising side of the company and the production/fulfillment/distribution side of the company respect each other helps ensure teamwork when the size and complexity of the business demand it.
Sales & Operations Planning is a common management practice designed to balance supply and demand.
How does S&OP actually work?
- Planner gathers data in advance (e.g., production schedules, sales estimates, fulfillment capacity)
- Planner synthesizes information into a preliminary forecast
- Group meets to resolve conflicts in the schedule/forecast and agrees upon a plan
- Planner finalizes forecast with the whole team
Interested in learning more? Download LIDD’s eBook Secrets Behind Successful Food Start-ups.