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How do Sales and Operations Planning (S&OP), Flexible Planning differ?

SAP Sales and Operations Planning (S&OP) is easy to implement, but SAP Flexible Planning can handle more complex processes, writes Jawad Akhtar.

How different is SAP Sales and Operations Planning (S&OP) from SAP Flexible Planning?

Companies are always striving to gain greater insights on factors that can help them with efficient and reliable product planning. SAP ERP offers two planning tools, namely, SAP Standard Sales and Operations Planning (S&OP) and SAP Flexible Planning.

SAP Sales and Operations Planning (S&OP)

S&OP offers preconfigured and predefined sets of planning parameters that companies can begin to use immediately. S&OP helps companies have simple and straightforward sales and production planning scenarios. One such scenario may be a sales plan created from sales forecasts and converted directly into a production plan with minor changes. A sales plan is the company's plan to sell products over a period of time, whereas a production plan defines how much to produce to meet the sales demand. S&OP works for individual materials or a group of similar materials known as a product group. A product group consists of similar products and the proportional factor of each product within the product group. A proportional factor is the proportion or percentage of individual products within a product group.

SAP Flexible Planning

SAP Flexible Planning offers the option and the flexibility to create self-defined information structures consisting of characteristics and key figures that are important to planners for decision-making. Characteristics may be a plant location, a material, a material group or a product group. Key figures consist of values or quantities of products being sold and may be, for example, total products' sales, total production in a plant or total customers' payments received in the last three months. Flexible planning helps the planner decide which product is bringing in the highest amount of sales or has the highest profit margin and therefore has been assigned a higher production priority. Flexible planning also enables the planner to account for events that may surge or depress sales or production. For example, events like the Super Bowl or Christmas may create a higher demand for products that the company can effectively incorporate in its sales and production plans. A snow-heavy winter may depress production due to vendors' ability to transport goods to the company's production sites. In flexible planning, the planning hierarchy performs the same functions as product groups do in S&OP.

Another advantage of Flexible Planning is that self-defined information structures can facilitate the reporting of characteristics and key figures that are important to process owners. This reporting functionality is generally unknown or hidden to many process owners.

About the author:
Jawad Akhtar is the author of the SAP PRESS book Production Planning and Control with SAP ERP. He is the head of SAP delivery in AbacusConsulting, where he focuses on logistics and SCM issues.

This was first published in March 2014

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