Sales & Operations Planning: Beyond the Basics

When Sales & Operations Planning (S&OP) was first being used, we saw it as better way to accomplish two highly important things:

  • balance demand and supply, and keep them balanced over time as demand and other factors shift
  • integrate operational plans with financial plans, enabling the business to be run internally with one set of numbers

These are no small accomplishments, but solutions to nagging problems afflicting companies forever. The early users—those who did S&OP successfully—were equally enthused. And so the word started to spread: Here’s a process that has a great deal of power, requires relatively few people, does not require new software and can be implemented quickly.

Over the years, other positive things started to happen in companies doing S&OP well. They found that they could build new capabilities into their S&OP processes, beyond the basic ones of the demand/supply balance and the integration of operational and financial planning.

These new developments did not go unreported. One would hear about them in conferences, read about them in magazines and emails. Unfortunately there was no common repository for this information, no one place where people could look to see the good things taking place. S&OP was becoming more and more powerful, better able to support companies in meeting their specific problems and opportunities, but this information wasn’t as available as it should have been.

This led me to write a book, Sales & Operations Planning: Beyond the Basics. It is intended to present advanced practices, in use today, that build upon the basic S&OP processes of demand/supply balance and operational/financial integration. It contains case studies of ten companies, including Applied Materials, Cisco Systems, Dow Chemical, Newell Rubbermaid, Staples and others. In writing this book, I learned a great deal. I’d like to share some of it with you.

I’ll focus on three of the ten companies featured in the book. Here’s the first one.


The Procter & Gamble Company (P&G)

Cincinnati, Ohio
Consumer Packaged Goods
Annual Sales: $78.9 billion

Executive S&OP[1] at Procter operates along two axes. One is product-focused, with three global business units: Beauty & Grooming, Health & Well-Being and Household Care. The other axis is based upon geography, or the five regions around the world. The plans for the businesses and the regions cover an 18-month horizon and are aligned into a single volume plan by business unit and market.

These projections are communicated to executive management, including the Chief Executive Officer; they form a key component of the quarterly earnings calls to Wall Street. This puts enormous pressure on Executive S&OP, which contains dozens and dozens of individual S&OP processes:

  • Some of which exist within the businesses; they generate the S&OP plans for the global demand/supply and financial picture for each segment within the business units. For example, the Dry Laundry Detergent business might be a component of Household Care.
  • Some exist within the geographic regions and sub-regions. Perhaps Scandinavia would be a subset of the Europe/Middle East/Africa region.

The results from all of these many units have to mesh together to result in a single, unified set of numbers.

It’s easy now to see why P&G expends substantial effort in continually assessing how and how well each Executive S&OP process is being done. Without this effort, it's almost certain that the individual businesses and regions would drift apart in their use of the process and thus, the internal single number process would not be possible.

Further, this would degrade the validity of the financial numbers generated by the S&OP process, possibly to the extent that they would not be usable in the development of financial projections and related earnings calls.

At P&G, the global S&OP process is governed by a small group of Global Process Leaders (e.g. Demand Planning, Supply Planning, Financial Planning). Their role, among other things, is to serve as the “owners” of the assessment process and its checklist. This group assures that each business unit performs an internal assessment of its S&OP process, to be followed by an external assessment by key people from outside that business who have a dotted line relationship to the Global Process Leaders.

This is a lot of work and it costs money, but the people at P&G feel that it’s well worth it. Here’s a quote from Dick Clark, Associate Director in P&G’s Global Supply Network Operations group and a key player in the evolution of S&OP at the company since the mid-1990s: “S&OP plays a substantial role; it is one of the—some might say the—primary planning processes used to run the business.”

Here’s the next company.



Houston, Texas

Oil Field Equipment

Annual Sales: Business Unit Did Not Disclose


This organization is a component of Vallourec & Mannesman Tubes, the world market leader in the manufacture of seamless hot rolled steel tubes. In July 2002, the tubular division of North Star Steel was acquired by V&M and renamed V&M Star.


They implemented Executive S&OP in 2006/2007, at the urging of their then-Chief Financial Officer, Adam Szczepanski, who had S&OP experience at a prior employer and was convinced that it would help solve many of the company’s problems. The implementation was highly successful.

Adam’s belief is that forward-looking financial plans are far better when developed in conjunction with S&OP. He states, “A finance model based on a revenue dollar forecast with a gross profit percentage is worthless. It’s too general to drive specific strategies and tactics. It’s usually a Finance exercise that has limited buy-in from operating folks and does not serve as a road map of the future.

“On the other hand, S&OP provides the meaningful details and single set of numbers that ties strategies and tactics to the financial forecast. Further, the extended planning horizon of S&OP provides financial forecasting with an opportunity to address strategic alternatives.”

Thus, S&OP-based cash flow forecasting became a way of life at V&M Star. Here’s an example of how it helped.


A few years back, the V&M Operations Department was planning for a major shutdown of their Pipe Mill in Youngstown, Ohio, expected to last 28 days and projected to improve processes and increase capacity by ten percent. In order to do this, they needed to produce early and build inventory so that the company could continue to service its customers during the shutdown.


The production plan in Executive S&OP reflected the increased production and the inventory plan showed the rather sizeable increase in inventory, to roughly 35,000 metric tons. Everything looked okay until Melissa and her colleagues in Finance ran the S&OP cash flow projection and saw an enormous problem: they were going to run out of cash.


An important item entering the cash flow forecast from outside of Executive S&OP was a multi-million dollar dividend payment to the corporate office in Paris that V&M Star was required to make periodically. I’m sure that many of you readers will agree that in cases such as this, the corporate office usually takes priority. Further, the V&M Star people felt that borrowing was not an option due to its cost.


The Melt Shop Manager was informed that his production plan could not be funded. He rethought the planned pre-build of inventory, reworked the production plan. He figured out how to do the upgrade in half the time. This took a lot of work and a lot of thought. He had to get quite creative, but manufacturing people are good at that.


Here’s Melissa again on what happened: “The April/May 2008 outage (plant shutdown) was completed on time and on budget. The outage impacted the Melt Shop for 14 days; nine major capital projects were completed and various other lump sum and maintenance items were done, as well. In early 2007 we started to see the impact that the outage would have on the inventory in April 2008, and thus we were able to start planning a year in advance.


“The outage was so successful that our customers didn't feel any effects from it. This was the pivotal event that showed us why we do S&OP…because it works!”


We’ve just read about a company headquartered in France and, before that, one in the USA. Next concerns a company based in Germany.





Ludwigshafen am Rhein, Germany




Annual Sales: €72 billion


BASF is the world’s largest producer of chemical products, billing itself simply as “The Chemical Company.” With more than 100,000 employees, this 150-year old company does business globally utilizing about 100 large sites and many smaller ones.


BASF wasn’t always the largest player in the chemical industry, experiencing substantial growth over the last decade and bypassing major competitors to become number one. Alan Milliken, Business Process Education Manager for BASF who has deep experience in Executive S&OP, says, “While BASF does many things well, S&OP has contributed significantly to helping us achieve our present (number one) position in the industry.”


BASF operates in 80 countries, and is divided into more than 60 Strategic Business Units primarily along product lines. The nature of the chemical business is such that plants are often highly product-specific, almost from the ground up; as such, a given plant will often “belong” to the business that markets the product. This results in a multiplicity of business units, each of which will have its own Executive S&OP process with the goal of operating S&OP globally to leverage synergies and maximize profitability.




BASF’s Global Executive S&OP process is shown graphically in Exhibit 1. Please note the following:


  • The demand plan is done on a regional basis, because the regions are the closest to the customer and are held accountable for attaining the sales volume in their forecast.  
  • These plans are then consolidated into a global picture of demand.
  • Supply is planned on a global rather than regional basis, for the reason cited above: the need to optimize the allocation of production. This is done quarterly by the Global Supply Chain Planner[2] using an advanced planning system (APS) software tool.
  • With these two sets of plans, the business is ready to conduct its Global S&OP meeting. (See Step 5.) Prior to the Global S&OP Meeting, the Global Supply Chain Planner works with the regions and plants to identify and resolve issues with the preliminary plan. Only exceptions requiring executive level input are elevated to the Global S&OP meeting, which normally takes place during the third week of the month.


Exhibit 1: Global S&OP at BASF

Global S&OP at BASF


Increased profitability through simulation and optimization. The software can perform “what if?” scenarios for S&OP team review, and will optimize gross margins based on pre-established objectives and logic.


To quote again: “S&OP, because of the way we use it to optimize production, has had a significant impact on the bottom line. So much so that BASF's global leadership has recognized the importance of S&OP by activating a permanent Global S&OP Process Expert Team to ensure harmonization on best practices and continuous improvement of the process."


Sounds a bit like Procter & Gamble, right?


These experiences are, to me, very exciting. They show that the power of Executive S&OP is much greater than we originally thought, and I feel as though we’re just scratching the surface.


I’d like to close with a word of caution. The companies cited here, and the others contained in my new book, are all doing the basics very well. They continuously keep demand and supply in balance, and they can see both units and dollars in their S&OP information. If they didn’t do the basics well, the advanced processes would crash because they’d be built on an unstable foundation.


So my message to you is, walk before you run. Get the basics working very well, and then go to work on enhancing your process to support the business even more effectively.


Tom Wallace is a teacher and writer specializing in Sales & Operations Planning. He is a distinguished fellow of the Ohio State University’s Center for Operational Excellence, and currently writes and speaks in conjunction with the Institute of Business Forecasting. He’s taught in Australia, Belgium, Canada, China, France, Great Britain, Mexico, New Zealand and the U.S.

Tom has written over twelve books, including his newest, Sales & Operations Planning: Beyond the Basics, now available at He can be reached at 513-281-0500 and This email address is being protected from spambots. You need JavaScript enabled to view it..

T.F. Wallace & Co.

[1] The high-level, volume-based component of the overall set of Sales & Operations Planning processes. In this article, we’ll use Executive S&OP and S&OP interchangeably.

[2] The Global Supply Chain Planner is a pivotal figure in this process. This function for a given business typically resides in either Europe or the U.S., and serves as the primary coordination point for most S&OP issues.