Sales & Operations Planning:

Benchmarks from Other Companies

by Dave Garwood

We often hear the question ...."How do other companies manage their SOP process and what results do they get?" We sent a questionnaire to companies we thought were doing a good job with SOP and were deluged with responses! The feedback provides some interesting insights ...

• The most frequent issue we hear about SOP is lack of integrity with the sales forecast. Our respondents indicated they had significantly reduced this problem. Variation in monthly actual demand compared to plan (forecast) by product family was within +/- 25% for 80% of companies. The companies that responded have clearly assigned accountability for meeting sales plans. Actual sales are compared to plan every month and root causes for deviations are determined. As a result, 82% attest that "Sales forecast accuracy significantly improved with the SOP process."

• The performance to Supply plans was also interesting. As would be expected, the tolerance for variation was tighter for supply than demand plans. Variation in actual production compared to plan by product family was within +/- 10% for 64% of companies. Most companies clearly assign accountability for meeting supply plans, calculate capacity requirements and track demonstrated capacity at least monthly.

• Finding the right number and structure of the product (or process) families is always an elusive issue. The survey included companies of many different sizes from a wide variety of industries. In spite of the diversity, 81% of the respondents were able to plan their business with 20 or fewer product families.

• Most companies had a formal SOP process and a followed a documented SOP policy. Over 90% of respondent companies have participation by the executive staff in the final SOP meeting.

• The successful processes were are well organized and many people in the organization participate. Ownership for the finalized plans is widespread.Separate pre-meetings to make preliminary demand and supply plans to reach compromising partnership agreements, where needed, are employed. The majority of the companies reported that agendas are circulated in advance and brief Minutes follow these meetings.

• The plans are not just operational plans. Over 86% of the respondents derive financial plans from the SOP plans.

The reported benefits derived from the SOP process included better integration of departmental plans, improved customer order delivery, enhanced communications across functional department silos and better company-wide decision making. Most companies also reported significant inventory reductions!