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Sales Planning

Sales planning actually has two major parts:   

  • Existing products - creating the aggregate sales plan from forecasts and management judgment
  • Product line extensions:  product introduction including status review and forecasts. 

Sales planning is typically distinguished from forecasting.  Forecasting is one and only one element of the sales planning process.  

Sales planning for the existing products typically includes the following:   

  • Review prior month performance:  actual sales to planned sales for the period.

    • Are the differences only in timing?  In volume?  In mix? 

    • Is there a bias built into the sales plan? 

    • Does a statistical analysis of variability yield useful information?  Can the cause of differences be established and action taken? 

  • Determine future customer needs

    • Were there assumptions made about the sales plan in the prior period and have those assumptions proven to be wrong?  If so what are the new assumptions and how will they affect the future forecasts? 

    • Use data from the customer wherever possible and reasonable. 

    • If forecasting is “come here”, sales planning is “sic ‘em”.  Assign responsibilities for achieving the sales plan to the appropriate people in marketing and sales.  Make sure that they are held accountable for achieving these results. 

  • Develop the overall demand plan and document any associated assumptions and responsibilities. 

  • Define inventory and backlog targets (needed to establish supply plans).  Inventory targets are typically stated as an inventory level, but can also be stated as a “service level” (say, 95% service) which can then be converted to an inventory level. 

  • Develop a preliminary S&OP (from the new sales plan, along with the desired inventory or backlog, and the starting inventory or backlog).  Refer to the S&OP Standard System for an explanation of the calculation needed to develop the supply plan and complete the preliminary S&OP.   

To be effective, the sales planning process must include a periodic review of the entire product line, with an eye to product rationalization to reduce the product range to increase profitability and product retirement at the end of life point.   

In the case of new products, the sales planning process typically includes many of the same initial steps, but typically also includes validation of new product development milestones and the development of resource reservations as part of the demand planning process.  This means that the new product engineering function (Design or Product Engineering or some similar title) will play an even greater role in the planning process than they would in the existing product sales planning.   

The end of the “development S&OP” process is similar to that of existing products – what are the assumptions made about the future demand, what is the supply plan for supporting the new product introductions, and will the capacity in the key resources be available?