Section 1: Introduction – The Strategic Role of S&OP in FMCG
Sales and Operations Planning (S&OP) is more than just a monthly meeting—it’s a vital, cross-functional process that ensures a company can match demand with supply in a financially sound and strategically aligned way. In industries with fast-moving products and short shelf lives, like Fast-Moving Consumer Goods (FMCG), the stakes are even higher. Poor alignment in such a sector often leads to stockouts, excess inventory, increased working capital, and unhappy customers. Conversely, well-orchestrated S&OP unlocks agility, margin protection, and long-term competitiveness.
In the FMCG environment, where promotions are frequent, lead times are short, and seasonality is often pronounced, reactive management is no longer viable. An integrated S&OP process provides companies with the necessary foresight and coordination to make timely, balanced decisions.
This article aims to bridge theory and practice.
I’ll explore:
- What S&OP is and why it’s critical
- The roles and responsibilities of each department
- Key data and metrics required to drive the process
- A realistic case study from an FMCG business
- A proposal for an integrated review model involving all critical functions
- Forecast accuracy measures such as MAPE and WAPE
- Practical guidance on how to institutionalize S&OP with lasting impact
Section 2: Theoretical Framework – What is S&OP?
At its core, Sales and Operations Planning (S&OP) is a structured, cross-functional decision-making process aimed at balancing supply and demand while aligning with financial objectives. It usually spans a 12- to 24-month horizon and is updated monthly. The goal is to enable a business to make proactive, informed decisions rather than reactive, siloed ones.
S&OP Process Steps:
- Product Review
Focuses on new product introductions (NPI), discontinuations, and portfolio health. In FMCG, this is critical due to the frequency of launches and delistings. - Demand Review
Sales and Marketing present updated forecasts, market trends, and promotional plans. Statistical forecasts are reviewed and adjusted based on business intelligence. - Supply Review
Manufacturing and logistics evaluate capacity, raw materials, labor availability, and any bottlenecks. They assess feasibility and risk of fulfilling demand. - Integrated Reconciliation
Data is aligned, gaps are identified, and scenarios are built. Finance provides impact analysis on revenue, cost, and margin. - Executive S&OP (Pre-S&OE)
A senior-level meeting where trade-offs, risks, and decisions are finalized to create a single aligned plan for execution.
Pro Tip: A circular flow diagram with arrows showing the 5-step S&OP cycle, indicating iterative feedback between each stage, to be used as a session’s roadmap for team members.
Section 3: Roles & Responsibilities – Departmental Accountability
Although the S&OP process is led by the Supply Chain Manager, it is owned collectively by all key functions. Every department is accountable for its inputs, analysis, and insights:
- Sales & Marketing & Demand Planner
Accountable for the demand forecast, promo plans, and market intelligence. - Supply Chain / Operations
Responsible for production, inventory, capacity analysis, logistics constraints, and risk mitigation. - Finance
Translates volume into financial impact (e.g., Gross Profit Margin and Net Contribution Margin), and reconciles planning with budget. - General Management
Facilitates strategic decision-making and supports escalation points.
Pro Tip: Use a RACI matrix for S&OP responsibilities by department and activity.
Section 4: Data Requirements for Effective S&OP
To make decisions, participants in the S&OP process need to rely on high-quality, timely data. A common pitfall is fragmented or siloed data, leading to poor decision-making or lack of trust in the numbers.
- Demand Side Data: SC Manager (Demand Planner) / Sales
- Historical sales by SKU/channel
- Forecast accuracy (MAPE, WAPE, bias)
- Promotion calendars
- Customer insights and POS trends
- Supply Side Data: Supply Chain Manager
- Capacity by production line
- Production Schedule by SKU
- Raw material and packaging availability
- Inventory levels (In transit & On Hand)
- Finance Data: Finance Manager
- Budget vs actual
- Gross Profit Margin (GPM)
- Net Contribution Margin (NCM)
- Working capital impact
- Cash conversion cycle
Pro tip: Use visual dashboards and exception-based reporting to drive faster insights and better discussion quality.
Section 5: Case Study – S&OP in an FMCG Company
Company: Super-Juice Beverages LTD, a mid-sized Irish FMCG company producing bottled drinks.
Challenges:
- 28% forecast error across top 20% of SKUs that contribute towards 80% of revenue (pareto principle)
- Service level at 89%
- Stockouts during peak promo periods
- €500,000 in obsolete inventory annually
Implementation of S&OP:
- Monthly S&OP chaired by the Supply Chain Manager (Demand Planner)
- Sales provided for 12 to 18-month rolling forecasts with promo overlays
- Operations models for capacity and materials scenarios
- Finance analysed impact on GPM and NCM
- Final sign-off by a cross-functional committee
Results After 6 Months:
- Forecast error reduced to 13%
- Service level improved to 97%
- Inventory write-offs reduced by €350,000
- Finance planning aligned to SKU-level
Key Success Factors: Shared ownership, disciplined cadence, transparent KPIs, and clear escalation paths.
Section 6: Integrated Review – How the S&OP Meeting Should Run
The integrated S&OP meeting replaces fragmented silos with a single collaborative forum. It should occur monthly and follow a standard agenda.
Participants:
- Supply Chain Manager (Chair)]
- Demand Planner
- Sales & Marketing Managers
- Operations / Production Manager
- Finance Manager
- General Manager / CEO (for escalation)
Standard Agenda:
- Demand Review: Forecast vs actual, bias, and MAPE
- Supply Constraints: Capacity bottlenecks, lead time shifts
- Inventory Status: Weeks of cover, slow movers, ETC.
- Financial Review: GPM, NCM (Net Contribution), and working capital impact
- Risks & Opportunities: Promo uplifts, customer orders
- Scenario Planning: “What-if” for promotions or shortages
- Executive Decisions: Sign-off, ownership, actions
Pro Tip: Use meeting slide showing KPIs, decisions required, and actions from prior meeting, with completion status.
Section 7: Forecast Accuracy Metrics – MAPE, WAPE, and Others
Measuring forecast accuracy is key for accountability and improvement. Here are the most relevant metrics:
MAPE (Mean Absolute Percentage Error)
- Pros: Easy to interpret
- Cons: Can exaggerate error when actual is very small
WAPE (Weighted Absolute Percentage Error)
- Adds importance of volume by weighting each product’s error
- Better suited for FMCG with high/low-volume SKU mix
Forecast Bias
- Measures whether forecast tends to over- or under-predict
RMSE & MAD
- Useful for comparing different forecasting models or tools
Section 8: Financial Integration – GPM & NCM
Beyond volume, aligning S&OP with financial metrics brings the business closer to profitability management.
- Gross Profit Margin (GPM) – Revenue minus COGS
- Net Contribution Margin (NCM) – GPM minus variable costs like distribution, marketing, and returns
Finance should translate volume scenarios into:
- Revenue forecasts
- Profitability at product/channel level
- Cash and working capital projections
Pro Tip: Use waterfall chart from forecasted sales down to NCM by SKU.
Section 9: Conclusion – Embedding S&OP for Long-Term Success
S&OP is a journey, not a one-off initiative. For FMCG companies facing volatility, promotions, and service pressure, a robust S&OP is a competitive advantage.
Takeaways:
- Ownership matters: Led by Supply Chain, owned by all
- Data is power: Poor data = poor decisions
- Metrics create trust: MAPE, WAPE, GPM, and NCM must be tracked
- Consistency wins: Monthly cadence with escalation clarity
- Finance must sit at the table: Volume without value is a trap
When well-executed, S&OP reduces chaos, increases visibility, and makes the business more resilient and profitable.
