Spring 2010 issue of Horizons

INDUSTRY u MANUFACTURING & DISTRIBUTION

Sales Operations and Financial Planning Most people know that S&OP stands for Sales and Operations Planning. But at many companies, S&OP has become focused only on customer demand and logistics as opposed to strategy. Many times the sales forecast is delegated to a supply manager who spends most of his/her time making impossible compromises between sales and marketing and the head of manufacturing or production. Demand is forecasted based on last year’s numbers, and historical performance leads the analysis. This practice is static and disconnected from the reality of what is occurring in the marketplace. As a result, there is a lack of clear or definitive direction for the company due to little involvement of top management, as well as a lack of communication through a cross- section of the company. In contrast, Sales, Operations and Financial Planning (SOFP) takes a more strategic approach. Designed to bring a company’s marketing, finance, sales and operations departments together to continuously monitor and meet customer demand, this formal and rigorous planning process is completed on a monthly basis to a specific schedule. As the separate departments collaborate, they create business plans with the latest and most accurate data. Sales and marketing forecast the number of products that will be sold each month for a predetermined mid- term period (the next 12 months, for example). These By Mike Lewis, CPA

37 u spring 2010 issue