SOP is used to verify the sales (demand) plan , create a rough–cut production plan aimed to satisfy demand, and to meet inventory targets
A part of annual operating planning (AOP), sales and operation planning (SOP) is a forecasting and
planning transaction to enable sales, production, and to enable inventory targets to be reached on
the basis of historical, existing, estimated, and future data. SOP is used to:
- verify the sales (demand) plan from COPA or other sources
- create a rough–cut production plan aimed to satisfy demand and to meet inventory targets
- visualize capacity use of critical resources
to verify the feasibility of the plan
The AOP exercise generally begins with forecasting the sales quantities and revenue for the coming fiscal year.
- Create sales plan
- Accepted sales quantities are transferred to SOP.
In SOP rough cut capacity planning of the budget sales quantities occurs to verify
that the goods to be sold can run through the company's bottleneck resources that are needed
to produce the goods.
- After the production plan has been proven feasible by SOP, it is transferred to a planning
scenario in long term planning module (LTP) by creating planned independent requirements (PIR)
that reflect the production plan generated by SOP.
- Based on these PIRs, materials requirements planning (MRP) is run in a simulated mode.
- After having run MRP, the prerequisites are fulfilled to carry out one of the
key objectives of the logistics part of AOP: to calculate the total utilization of the activity types
assigned to the manufacturing work centers allocated by the production plan.
The aggregated utilization of the work center's activity types is the basis for the budgeting process
of the manufacturing cost centers.
- Avoid bottlenecks, over- and under-absorption in production.
- Material requirements planning as a basis for purchasing contracts.