Don’t Wait Until Month Ends: S&OP and S&OE

Jan 19, 2023 | S&OP/ IBP


Who could forget COVID-19? It changed the world. It changed everything. It changed you. For supply chain, there is a before and after, a transformation from unknown to celebrity.

COVID-19 also disrupted the planning world. Many questioned if there was a need for planning at all. Others, instead, started or deepened their efforts on Sales and Operations Execution (S&OE) to thrive during the challenging times.

In this article, we will cover the following:

S&OP/ IBP Integrates Strategy Management

S&OP has different maturity levels. One of the most known assessment tools is Gartner’s S&OP maturity levels with a 5-point scale. In less mature S&OP processes, S&OP limits its scope to balance demand and supply over a short period of time.

A key output of this process is the inventory plan. The planning horizon covers from 3 months to 12 or 18 months.

In its most advanced phase, S&OP—also called Integrated Business Process (IBP)—is an executive management process that involves finance integration and aggregate planning.

It is the conduit to execute the strategy and business plans. A key output is the projected financial statements: Profit and Loss Statement (P&L), Balance Sheet, and Cash Flow Statement.

In addition to the integration with finance, new product development, SKU rationalization, and scenario-based simulations are part of this strategic management process.

The time horizon is longer than in less mature S&OP processes, being from 3 to 24 months.

S&OP/ IBP involves monthly meetings that allow the team to identify issues and gaps with the strategy to adjust quickly. Through this monthly meeting cadence, the team monitors to ensure a proper strategy execution.

Have you noticed that S&OP/IBP starts at the end of month three? You may be wondering about the first three months. Here is where S&OE—also known as Integrated Tactical Planning (ITP)—comes into play.

S&OE is the Next Level of Execution

The next level of execution is S&OE/ Integrated Tactical Planning to cover the first three months, or to be technically correct, the planning fence or lead time.

Some companies have longer or shorter lead times than the average three months. COVID-19 accelerated the implementation of S&OE in many companies due to material shortages and supply chain disruptions.

Think of S&OE like a mini-version of S&OP with focus on the weekly and daily execution to ensure that S&OP rolls out successfully.

By doing so, executives don’t have to be involved in every detail.  The plans are the same, but the aggregation or granularity level is different, as the time horizon is different too. The shorter the time horizon, the more granular the plan becomes.

The IBP plan has monthly buckets. S&OE takes these monthly buckets and translates them into weekly buckets with a lower level of detail.

For example, from the product families included in S&OP to the SKU level in S&OE.

This mini-version of S&OP has the following:

  • Product Portfolio Plan – S&OE addresses the changes in the product portfolio by monitoring runout dates to minimize inventory write-offs.
  • Demand Plan — this is the constrained demand, as the team has considered the available capacity and resources.
  • Supply Plan — Like with the demand plan, there are constraints in the supply plan because with S&OE, we are inside the planning time fence. The team has ordered the raw materials and packaging, secured labor crews, and reserved machine capacity and warehousing. Any changes within the lead time imply higher costs. For example, to expedite materials. There are situations when even expediting is not possible.
  • Inventory Plan (Output) — It is an output of the product portfolio, demand, and supply plans. This inventory plan will be in weekly buckets. We want to see the details at that level with S&OE, con sidering the specific patterns in each month. Weekly averages are not enough.
  • Financial Plans (Output) — Financial plans are also outputs. Like the inventory plan, they come from the operations side including portfolio, demand, and supply plans.

The integration with Finance is fundamental in the most advanced S&OP/ IBP processes. In S&OE, Finance also plays an essential role to manage change, analyze financial implications, and avoid month-end surprises.

Finance ensures to keep the dialogue open between the S&OP/ IBP plans and those in S&OE.

While S&OP plans cascades into S&OE for the highly tactical short-term execution, when there are changes in the S&OE time window—revenue, cost, inventory and in general current assets and current liabilities impacting working capital—S&OE needs to incorporate these changes back into the S&OP/ IBP plan.

Decisions in S&OP/ IBP impact S&OE as well as decisions in S&OE—following the established escalation process—impact S&OP.

S&OE does not replace S&OP

S&OP and S&OE don’t replace each other, instead, they complement each other.  S&OP and S&OE of S&OP are different in the following aspects:

  • Objective—S&OP is a strategic process that manages resources and production or supply to meet demand. This is why initially we have an unconstrained demand. S&OE focuses on execution and unlike S&OP, S&OE manages demand to meet resources and supply within the time fence (we are using the average of three months).
  • Planning horizon—S&OP extends from 3 to 24 to 36 months. S&OE has a much shorter planning horizon, being the first 3 months or the lead time.
  • Meeting cadence—In S&OP the meeting cadence is monthly while in S&OE, the meeting cadence is weekly.
  • Participants—Executives are the participants in S&OP. Senior Management are the participants in S&OE. Precisely, the intent is to keep executives aways from the daily and weekly execution.
  • Level of detail—S&OP has an aggregate view while S&OE a detailed view. As stated, from product families in S&OP to SKUs in S&OE.


S&OE is fundamental for a successful S&OP/ IBP. S&OP integrates strategy management and cascades the aggregate operations plans—product portfolio, demand, and supply—into highly actionable operations plans in S&OE.

Inventory and financial plans are outputs. The integration with finance is critical in the most mature S&OP processes and it is a two-way street; from decisions in S&OP/ IBP to S&OE and from decisions in S&OE to S&OP/ IBP.

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