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What is S&OP?
Sales and Operations Planning (S&OP) is a cross-functional business management process designed to align a company’s supply chain execution with its customer demand. Historically, sales teams would forecast demand based on aggressive quotas, while manufacturing teams would plan production based on cost-cutting efficiencies. S&OP bridges this gap. It provides a structured, recurring cadence where executives from sales, marketing, operations, and finance meet to agree on a single, unified operating plan. This way these activities are performed as coordinated supply planning decisions, with the intent to deliver increased revenue, improved service levels, reduced supply chain costs, greater productivity, better cash flow and higher profits.
Why is S&OP important?
When a company lacks a mature S&OP process, the results are chaotic: expedited freight costs skyrocket, warehouses overflow with obsolete inventory, and customers face chronic stock-outs. Implementing a robust S&OP process directly combats these inefficiencies. According to benchmarking data from Gartner, organizations with highly mature S&OP processes achieve:
- Up to a 20% reduction in inventory holding costs.
- A 10% improvement in order fulfillment times.
- 33% more likely to respond quickly to market changes
The challenges for business and why proper Sales and Operations Planning can benefit them
Making the right decisions about business strategy and business processes is not easy and many decisions counteract each other, which may lead to poor business outcomes. Let’s look at some of the fundamental challenges that businesses face.
1. Decisions and plannings are made on separate islands
Because different silos and teams - such as planning, supply, and operations - within one organization have different decisions and plans to make, they can be created to counteract one another. In these cases, a separate planning department comes in handy.
2. Planning cycles don’t match across the whole organization
When one team finalizes plans by day and another plan monthly, it is difficult to connect the teams’ activities to each other, which can result in flawed execution and chaos. Time needed to follow the company's strategy is also needed to resolve problems and chaos surrounding planning cycles. Thus, you lose money.
This is where a Sales and Operations Planning process comes in handy: it connects the planning teams, their processes and their schedules.
3. Different techniques & platforms for different technologies
The third major challenge to successful Sales and Operations Planning (S&OP) is the decision-making technology stacks. Each company uses their own preferred technology platforms, applications and other stacks. There are different technology stacks for keeping up with data, planning and reporting. You can either use these planning stacks for importing data or use them for analyzes and development in the long run.
These different platforms can make the lives of Sales and Operations Planning (S&OP) managers easy, but unfortunately, they can also wreak havoc in the carefully curated existing workflows: different platforms with different techniques and data sets need to be aligned with each other as much as possible.
Sales & Operations Planning Process
Sales & Operations Plan (S&OP) is a multi-step journey: it requires you to have a roadmap of prioritized actions with quick but sustainable wins and benefits. To create that roadmap, you firstly need to understand the different elements of an S&OP process.
1. Product review and data collection
Firstly, the current products are reviewed as a means to collect data and create sales forecasting. This review involves correcting and adding data, updating KPI dashboards and more. The data is gathered from all departments, with sales, marketing, operations & logistics, supply and finance as a priority. By using demand planning software for S&OP processes, many of these tasks can be performed automatically.
It is important to build up as much knowledge as possible through trend watching and gathering new methods and techniques for forecasting.
2. Demand planning
Secondly, demand planning is taken into account. A forecast demand plan that takes a complete picture of demand, marketing, introduction of new products, consumer trends, product hierarchy and other things into consideration, is most important in this second step.
As part of this picture, the complete demand planning will cover past and future performance, revenue gaps and comparisons with finance evaluation.
Cross-functional collaboration for the Sales and Operations Planning process is essential. The different forecasts and planning cycles are analyzed, through which adjustments can be made in terms of inventory and customer service.
3. Supply planning
Supply chain planning is a follow-up step to demand planning. A proper supply plan involves inventory targets, preferred stock levels and different methods and strategies for demand chase, among other things. Supply chain planning also includes assessments of the demand targets in terms of available (storing)capacity, inventory and scheduling different parts of operations.
During supply chain planning, representatives from finance, operations, and materials are able to determine whether there are any problems in terms of stock, products or people. This way, the company is assured to have a supply plan that is free from any capacity constraints.
Management is responsible for the creation of the supply plan. Team leads from departments like manufacturing, operations, logistics, and finance are consulted for input and verification.
4. Reviewing and fine-tuning plans and strategies
The fourth step occurs during the monthly pre-S&OP meeting. Is the company facing supply issues? Is the company still able to meet sales and backlog objectives or other KPI’s? Reviewing previous month’s plans and presenting forecasting plans help with this. These plans are presented via shared dashboards and metrics like revenue, profit and inventory are analyzed on both higher and lower levels down the product line. The adjustments that are needed for the supply plan will be decided during this meeting.
5. Implementation of sales and operations plan
Once the demand and supply plans are reconciled and finalized, the result is presented to the executive team during the monthly Executive S&OP meeting. After a ‘Go’ from these executives, it is time to actively run the S&OP plan! The Sales and Operation Plans need a regular evaluation as described above to be successful and to avoid gaps in planning.
The S&OP manager is the person that is responsible for implementing the plan.
S&OP best practices by o9 Solutions
o9 Solutions came up with a single integrated plan for all planning processes across the horizon. o9’s Graph Cube Data Model allows for aggregation and disaggregation to the right level of detail for each planning horizon to support end-to-end synchronization. o9 Solutions offers S&OP software that can be used throughout the entire organization and will solve the future demand of business-wide business planning. Here are a few reasons why this software works:
Complete P&L and KPI visibility
The software summarizes scenarios with connected financial KPIs and strategic plans. It understands financial metrics - such as margins, revenues, and working capital - and molds this into operational data. With the help of the Graph Cube Data Model, most companies can use financial performance, financial reasoning and reconciliation within the integrated planning process of your business.
Cross-functional and interactive plan review & publication o9’s Sales & Operations Planning uses Natural Language Processing (NLP) based search & discovery. With this S&OP process platform, you can create interactive views instead of static dashboards and turn cross-functional processes, review and alignment into a fluid process.
Live on platform meeting capability
Your management or business leaders can create live presentations step by step with live data for S&OP meetings, removing hundreds of hours of manual work. The business planning process will take up less time, and the complex supply chains and their ways of working will be easier to understand.
Big data enabled
With the help of the S&OP software, you can leverage real-time structured and unstructured data from the market, customers, and operations to drive insights into trends and potential disruptions and thus set up a strategic plan for the future.
From S&OP to IBP: The Evolution of Planning
While S&OP is highly effective at balancing volume (units of supply vs. units of demand), it often fails to balance value (profitability and strategic goals). Traditional S&OP is frequently owned by the supply chain department and focuses strictly on operational feasibility.
To survive in a modern, hyper-competitive landscape, organizations must transition from S&OP to Integrated Business Planning (IBP). IBP is not a replacement for S&OP; it is its natural, strategic evolution.
The Difference Between S&OP and IBP
IBP expands the traditional S&OP framework by deeply embedding finance, product portfolio management, and strategic planning into the core process. While S&OP asks, "Can we build what we plan to sell?", IBP asks, "Is what we plan to sell aligned with our corporate strategy, and will it hit our margin targets?" In an IBP framework, every operational change is instantly evaluated through a financial P&L lens. If a supply planner suggests air-freighting materials to meet a demand spike, an IBP system immediately shows how that decision impacts the company's EBITDA.
The ROI of Upgrading to IBP
The financial and operational impact of transitioning to IBP is profound. Extensive industry data proves that the upgrade delivers massive returns:
- Profitability and Revenue: A comprehensive five-year study of over 170 companies by McKinsey & Company found that mature IBP practitioners achieve 1 to 2 additional percentage points in EBITDA. Furthermore, Oliver Wight benchmarks indicate that IBP implementations deliver an average annualized ROI of 63%, with sales revenue increases of up to 15%.
- Operational Efficiency: McKinsey notes that mature IBP processes lead to 10% to 15% lower freight costs and capital intensity, alongside a 40% to 50% reduction in customer delivery penalties and missed sales.
- Customer Retention: Because IBP synchronizes product launches, marketing, and supply, customer service levels drastically improve. McKinsey reports service level bumps of 5 to 20 percentage points, while Aberdeen Research has tracked customer retention rates reaching as high as 91% for companies with well-structured IBP.
Overcoming the Implementation Gap
Despite the overwhelming data, the transition from S&OP to IBP is often stunted by technological and cultural barriers. According to Board International's Global Planning Survey, companies relying on fragmented planning (like spreadsheets and disjointed ERPs) suffer from 40% longer planning cycles and spend 60% more time on data reconciliation than strategic analysis.
Similarly, McKinsey points out a severe maturity gap: only 29% of businesses treat IBP as a true long-term strategy led by the board, and a staggering 91% of companies are not pushing their IBP processes far enough to fundamentally alter their supply chain success.
To successfully upgrade to IBP, companies must:
Embrace Cross-Functional Accountability: Product R&D, Marketing, and Finance must have equal weight in the planning process as Operations and Sales.
Secure True Executive Sponsorship: IBP must be led by the CEO or General Manager, not just the VP of Supply Chain.
Implement Financial Integration: Utilize modern IBP software (moving away from static spreadsheets) that features advanced scenario modeling, allowing teams to instantly see the P&L impact of "Plan B" or "Plan C."
Real World Case Studies from o9
By leveraging the AI-powered o9 Digital Brain platform, hundreds of Fortune 500 companies have successfully transformed how they plan and execute, replacing legacy systems with one unified data-driven platform.
Here are the highlights from some of the world's most complex supply chains that have successfully implemented and scaled o9's IBP capabilities and achieved measurable ROI:
Kraft Heinz partnered with o9 Solutions in North America and Europe to implement an advanced ML forecasting platform, collaborative demand planning solution, and a sales planning module. This initiative resulted in:
- 25% Reduction in Excess Inventory
- 11% Increase in Monthly Forecast Accuracy
- 32% Reduction in Time Spent on Forecasting
By leveraging o9’s integrated planning platform, AB InBev replaced legacy systems such as SAP APO with a single, cloud-native solution, streamlining demand forecasting, supply planning, and inventory management. The transformation enabled:
- 60% Reduction in Out-of-Stocks
- 53% Decrease in Inventory Losses
- 70-90% Touchless Planning
o9’s platform enabled T-Mobile to overcome the challenges of rapid demand growth and achieved:
- 99%+ service levels
- $1 Billion in Value Realized over 3 Years
- 100% fulfilment rates
About the authors
Simon Joiner
Director of Product Management
Simon Joiner is a Director of Product Management, Demand Planning at o9 Solutions. He has over 20 years of experience in transforming Demand Planning Systems, Resources and Processes in such diverse sectors such as Pharmaceutical, Building Supplies, Agriculture, Chemical, Medical, Food & Drink, Electronics, Clothing and Telecoms. Simon lives in Hemel Hempstead in the UK with his wife and two (grown up) children and in his spare time likes to play guitar, research family history, walk the dogs and keep fit with running.
