What Is Sales Planning and Operations? (With Important Tips)

By Indeed Editorial Team

Published May 28, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Sales planning and operations, also known as sales and operations planning, is an important process for managing a sales company. Executive members of a company use this process to align the company's goals and increase revenue. Understanding this concept can help you balance the supply of goods and the demand if you work in the sales department of a company. In this article, we explain the concept of sales and operations planning, highlight its importance, and provide a few tips that can help you manage this process effectively.

Definition of sales planning and operations

Among a few processes companies incorporate in business management, sales planning and operations are one of them. The companies that use sales and operations planning frequently use it to maintain focus, align the company with its goals, and create new strategies. Sales and operations planning is a business practice common to companies that manufacture and sell products. The executive members of a company, through this process, can make important decisions and approve profitable financial plans. The primary function of sales and operations planning is to align a company's supply of a particular product with the demand for the product.

Sales and operations planning is both a tactical and strategic plan. Businesses manage the process through well-thought-out reporting techniques. Typically, the sales team and the operations team are both creating a production plan, which needs the approval of the executive arm of the company. Some other departments of the company, often involved in the sales and operation planning, include the following :

  • Marketing department

  • Transportation or logistics department

  • Manufacturing department

  • Procurement department

  • Finance department

Importance of sales and operations planning

Sales and operation planning is an essential process for a company's development and growth. Below are a few reasons why this business process is important:

Balances supply and demand

The overall importance of sales planning operations is that it helps a company maintain consistency in the relationship between the demand for products and the supply of the products. Balancing the reports and predictions from the sales department with the manufacturing department's output can help maintain parity between demand and supply. The company can also work out profit margins through this process.

Related: What Is Demand and Supply? (Including How They Work)

Saves time and resources

When companies use this process effectively, they can correctly and accurately calculate the number of resources required to manufacture a product. Managers can load the required resources to meet the company's sales goals. These resources can include employees and their services, raw materials, and finance. Also, with sales and operations planning, managers can efficiently manage and save time.

Improves patronage

Companies that plan their sales and operations often enjoy continued patronage because the process helps to increase consumer satisfaction. Sales planning and operations help guide a company on the right amount of manufactured products that match the consumers' requests. For example, when consumers place an order for a product and get the products on the scheduled date for delivery, it helps to improve the company's public image.

Related: Comprehensive Guide to Customer Service (With Tips)

Increases adaptability in the market space

When a company maintains a balance between the demand for a product and the supply, the company can quickly adapt and adjust to market changes. For example, some economic factors that can affect the market are raw materials scarcity, activities of a competitor company, or outbreaks of a political conflict or pandemic. This operation helps companies make strategic and swift decisions to reduce the risks of market instability.

Provides smoother recording of successful strategies

Some companies use sales and operations planning to record strategies that fulfilled their purposes. Using this process, they track the systems that help them attain or exceed their sales and manufacturing goals. A company can also improve and expand on successful strategies to achieve similar success in the future.

Serves as an essential business communication tool

Sales and operations planning helps establish a company's key and defined communication method. Usually, all the company departments participate in developing and achieving the company's set goals through the proposed strategy. The process allows departments to contribute to critical interactions about the production, sales, finance of the company.

Sales and operations planning practices

Here are a few practices standards in sales and operations planning a company can follow to improve its sales:

Product review

Product review is the process through which companies allow customers or employees to evaluate periodically a product's quality, usefulness, and functionality. Companies that use product reviews in their sales and operations planning enable consumers to express their opinions or feedback about their products. Once they get positive reviews from their customers, it helps them forecast an increase in demand, improving their supply plans.

Demand review

Demand reviews calculate and give a rough estimate of the expected consumer demand for a product. Companies that use the demand review to plan sales and operations usually need professionals to analyze requests, calculate trends, consider unexpected circumstances, and measure the demand plan. They typically measure demand using the number of actual units of a product they expect to sell.

Supply review

Supply review is the converse review of the demand review, where the company forecasts how to meet the demand target irrespective of manufacturing restrictions. Companies that use this practice focus on producing enough products to satisfy consumers' demands. The company can swiftly resolve any shortage of resources that can affect production adversely.

Finance review

The finance review is a sales and operation planning practice that looks at the company's activities from an alternative perspective. A finance review is an overall overview of a company's performance based on financial activities. Specific values, such as total sales over a particular period, anticipated sales, actual sales, total expenditures incurred, and total revenue generated, are essential for calculating the company's financial activity.

Pre-sales and operation planning

The pre-sales and operation planning is usually the first stage where stakeholders from the different departments of a company meet and deliberate. These representatives come from the production, sales, finance, operations, marketing, and logistics departments to compare their products for the supply and demand plans. They also discuss the possible financial impacts of their productions.

Executive sales and operation planning

The executive sales and operations planning stage participants are usually significant stakeholders in a company. During this stage, the executive members of the company review and assess the information, predictions, and suggestions from the pre-sales and operation planning stage. They either approve the recommendations given or improve on them and develop a final plan for the company.

Essential tips for sales and operations planning

Here are a few tips you can use for sales and operations planning of a company:

Identify the company's goals

The primary aim of sales and operation planning is to position the company's goals with consumers' demand and product supply. As a sales manager, you can consider the trend for the products and compare it with its goals. It's crucial that you establish and distinguish the company's long-term goals from the short-term ones to review the company's performance.

Related: How to Use Business Objective Examples to Write Your Own

Consider market changes

Several economic or social factors can affect sales and operations planning. If you want to record success, ensure that you can consider all these factors. When you think about these changes, it helps the company plan swift strategies that are critical for success. Remaining open to change can help measure the market change that might affect the company while trying to achieve the company's goal.

Study the present sales figures

When planning sales and operations for a company, it's essential that you know the current sales figure concerning the company's recent performance. You can also attempt to envision how it aligns with future goals. It can help the company manage a positive analysis, discover the practices to continue, and implement new approaches that can help it achieve the desired outcome.

Ensure the staff understands the importance of data collection

Having a complete and accurate view of records and data from both the sales and demand departments of a company is an essential aspect of sales and operations planning. Ensure that the recording department collects and stores accurate values the company can use when attempting to align supply with demand. A comprehensive collection of the data also helps give a full-scale view of the company's current state in all areas.

Enlighten stakeholders in the company

The stakeholders in a company are critical to achieving the company's goals and objectives. If you want to create an excellent planning structure, ensure that you educate and advise relevant stakeholders to participate in the entire process. For example, you can call for periodic meetings to talk through updates, discuss plans, and make workable suggestions. These meetings can also be a platform for regular assessment and evaluation of the company's performance. Through the discussions, stakeholders can enforce the changes required to achieve the company's objectives.

Explore more articles