In brief: It is a situation frequently encountered in practice that meetings are held regularly every month but it is not clearly known which decisions were made at the end of the month, and the source of the problem cannot be explained by the number of meetings. The value of the S&OP cycle comes from clearly defining which decision is made by whom in each meeting. This article covers the calendar of the monthly cycle, the decision logic that determines with which options the demand-supply gap will be closed, preparing scenarios, and the changes that arise in the move from S&OP to IBP. For the general definition and flow of S&OP, the What Is Sales and Operations Planning? page can be consulted. In this article:How Is the Monthly Cycle Calendar Set Up?Which Decision Is Made in Each Meeting?Decision Logic: How Is the Demand-Supply Gap Closed?How Are Scenarios Prepared?What Changes in the Move from S&OP to IBP?How Is the Health of the Cycle Monitored?Technology and Digitalization: Data-Driven S&OP/IBPImplementation: Checklist How Is the Monthly Cycle Calendar Set Up? TimingStepMain OutputDecision Owner Week 1Data close and portfolio reviewCurrent sales, inventory, and capacity data; list of new products and product exitsDemand planning / product management Weeks 1-2Demand reviewUnconstrained demand plan, assumptions, risks, and opportunitiesSales and marketing manager Week 2Supply reviewConstrained supply plan, capacity gaps, and optionsOperations / supply chain manager Week 3Pre-S&OP (reconciliation)Solutions within authority, decision proposals and scenarios to be presented to managementS&OP process owner Week 4Management S&OP meetingApproved company plan, decisions made, and actionsGeneral manager and management team When setting up the calendar, meetings should not clash with the financial close, and the input of each meeting should be the output of the previous one. It is recommended that meeting dates be announced once at the start of the year; this way, the issue of setting dates does not come up again every month. Which Decision Is Made in Each Meeting? Demand review: The answer to "what can be sold?" is approved without taking the capacity constraint into account. Campaign, price, and new customer assumptions are put in writing; a correction decision is made for product families with high forecast error.Supply review: It is determined which part of the demand plan can be met with current capacity, material, and inventory targets. Options for the part that cannot be met are prepared together with their costs; the decision is not made here.Pre-S&OP: Gaps within the limits defined in the authority matrix (for example, overtime within policy, shifting capacity between products) are closed here. Issues that exceed the limit are taken to management as a decision proposal with at most two or three options.Management S&OP: Decisions that exceed the authority limit, such as investment, adding a shift, using subcontracting, allocation between customers, postponing a campaign, or changing prices, are made, and the plan is approved as the single company plan. Decision Logic: How Is the Demand-Supply Gap Closed? A situation frequently seen in practice is that the sales unit puts forward planned campaigns while the production unit puts forward insufficient capacity. The gap can run in two directions; demand may exceed capacity or capacity may fall short of demand. In both cases, options must be evaluated in a certain order according to cost and reversibility criteria: OptionWhen Is It Appropriate?Cost / Risk Pre-build (producing ahead into stock)If idle capacity exists before the seasonal peakInventory carrying cost, obsolescence risk Overtime / additional shiftIf the gap is short-term and limitedUnit cost increase, fatigue Product mix changeIf the constraint is at a specific line or resourceService decline on some products Subcontracted productionIf the gap will last several periodsMargin loss, need for quality control AllocationIf the gap cannot be closed in the short termCustomer satisfaction; requires a priority rule Demand shapingIf campaign or price flexibility existsRevenue loss or deferral Capacity investmentIf the gap is structural and permanentInvestment, payback period This order and the authority holder for each option must be defined in writing in advance. Otherwise, the same discussion is held again every month. How Are Scenarios Prepared? If the scenarios presented to management are not comparable with each other, making a decision becomes difficult. For this reason, it is recommended that all scenarios be presented with the same template. The template should include volume, revenue, gross profit, inventory value and days, service level, and the utilization rate of bottleneck resources. For example, in a situation where demand comes in markedly above plan, scenario A may include overtime and pre-build, scenario B subcontracted production, and scenario C customer allocation. What is expected from management is to choose one of these scenarios rather than to re-debate the numbers. What Changes in the Move from S&OP to IBP? Financial reconciliation: The volume plan is converted into a revenue and profit plan; the gap between it and the budget and business plan becomes visible every month.Longer horizon: On a horizon extending from 18-24 months to 24-36 months, strategic projects and capacity investments are also included in the plan.Portfolio and strategy: New products, product exits, and market entries enter the cycle as a separate review step.Scenario orientation: Instead of a single plan, alternatives prepared for possible futures are compared. IBP is built on top of a well-functioning S&OP process. When a move is made to financial integration before the basic cycle has settled, meetings often cease to be a decision platform and turn into reporting sessions. How Is the Health of the Cycle Monitored? IndicatorWhat Does It Show? Forecast error at the product family levelReliability of the demand plan (see Forecast Error and Bias) Adherence to the production planThe level at which the approved plan is implemented Distance of inventory days from targetConsistency of the inventory policy On-time in-full delivery (OTIF)The result of the plan as reflected to the customer Rate at which decisions are followed upThe capacity of meetings to produce and implement decisions Among the problems most frequently encountered in practice are meetings turning into data presentations, decisions not being recorded, the finance unit not taking part in the process, the planning horizon being squeezed into only the following month, and the monthly plan not being linked to weekly operational planning (S&OE). The output of a good S&OP meeting is a list of decisions with an owner and a date. Technology and Digitalization: Data-Driven S&OP/IBP The planning team devoting the first week of the month to merging files reduces the time left for discussing options in meetings. The effectiveness of the cycle depends directly on how quickly and consistently the data presented to the meetings is prepared. The main contribution of digitalization in this area is to redirect teams' time from collecting data to evaluating options. Enterprise Resource Planning (ERP) is the enterprise transaction system that records orders, inventory, purchasing, production, and finance transactions in a common database; it is the master data and transaction source for planning. It is the source of sales, inventory, production, and cost actuals; it provides the master data for converting volume plans into financial value. Advanced Planning and Scheduling (APS) is a planning system based on optimization and heuristic methods that produces feasible plans and schedules by considering capacity, material, and priority constraints at the same time. It combines demand, supply, and capacity plans in a common data model and calculates capacity-constrained scenarios before the meeting. Artificial Intelligence (AI) and Machine Learning (ML) are methods that learn patterns from data to produce forecasts, classifications, and recommendations; machine learning is the sub-field of artificial intelligence that learns from data. They combine short- and medium-term demand signals, capture patterns in plan-versus-actual gaps, and prioritize which gaps require a manager's decision. Generative Artificial Intelligence (GenAI) is a type of artificial intelligence based on large language models that answers questions in natural language and produces summaries, reports, and draft explanations. It prepares drafts of the pre-meeting reading pack, the gap list, and decision summaries, and speeds up keeping the decision record. Digital Twin is a virtual model of a factory, line, or supply network that is updated with data; it allows scenarios to be tested without affecting the physical system. It makes it possible to test scenarios such as capacity investment, a new location, or a supplier change on a virtual model of the supply network. Internet of Things (IoT) is the infrastructure in which sensors on machines, vehicles, warehouses, and products transmit data automatically over a network; location, temperature, status, and consumption data are collected without human input. Near real-time data from production and logistics allows deviations from plan to be seen within hours rather than days at the S&OE level. Supply Chain Control Tower is a monitoring structure that combines order, inventory, production, and shipment data on a single screen to show exceptions and risks early. In S&OE, it provides input to the weekly execution meeting by collecting inventory, shipment, and production exceptions on a single screen. In an artificial intelligence supported process, the division of tasks must be clearly defined. The system calculates scenarios, flags risks, and prepares summaries. Choosing among the options, balancing objectives, and taking responsibility are the task of the management team. For this reason, investment in technology yields a higher return once decision rights and the meeting calendar have been clarified. The system calculates the scenario, while management makes the decision; digital S&OP should be put into operation after decision rights and the calendar have been clarified. Implementation: Checklist Announce the annual S&OP calendar so that it does not clash with the financial close.Put the input, output, and decision owner of each meeting in writing.Build an authority matrix containing the gap-closing options and the authority limits for each.Set a single comparison template for scenarios.Make the decision list the first agenda item of every meeting.Review cycle health indicators quarterly.Feed the S&OP dashboard automatically from ERP data; prepare scenario calculations before the meeting with APS or the planning model. Related Articles How to Measure and Interpret Forecast Error: Bias and Percentage Error MetricsS&OP in Consumer Durables: Seasonal Stocking and Capacity BalanceDemand Planning and S&OP in Fast-Moving Consumer Goods (FMCG): 5 Critical Topics Frequently Asked Questions Who should attend S&OP meetings? In the demand review, sales, marketing, and demand planning take part; in the supply review, production, purchasing, and logistics units. The management meeting is attended by the general manager and function heads, including finance. Finance needs to be involved in the process because it is the unit that links the plan to the budget. What should the planning horizon of S&OP be? A horizon of at least 12-18 months is recommended. This way, seasonal peaks, capacity investments, and long-lead-time materials can be seen in time. In IBP, the horizon generally extends to 24-36 months. Is it necessary for S&OP to mature before moving to IBP? In practice, yes. When demand and supply reviews do not run regularly and the decisions taken are not implemented, financial integration added on top can turn the cycle into a structure that produces reports instead of decisions. How should decisions be recorded? At the end of each meeting, the decision, the responsible person, the deadline, and the expected impact should be recorded in a single decision list. It is recommended that the next meeting open with a follow-up of this list. Is a dedicated planning system necessary for S&OP? No. In the early stages, you can start with process discipline, shared data, and well-designed spreadsheets. As the number of products and locations, the need for scenarios, and the cycle speed increase, integrated planning systems make a distinct difference. However, the process must be established before the technology. References Wallace, T. F., & Stahl, R. A. (2008). Sales & Operations Planning: The How-To Handbook (3rd ed.). T. F. Wallace & Company.Jacobs, F. R., Berry, W. L., Whybark, D. C., & Vollmann, T. E. (2011). Manufacturing Planning and Control for Supply Chain Management (6th ed.). McGraw-Hill.ASCM. ASCM Supply Chain Dictionary (APICS Dictionary): entries for "sales and operations planning" and "integrated business planning". Related Optimum Planlama Trainings handshake Sales and Operations Planning, S&OP/IBP Build the balance of demand and supply with competitive tactics and consensus. 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