S&OP was developed with the concept of aggregated production planning (APP) in the first part of the 1950s, then switched to manufacturing resource planning (
MRP 2) around 1985, until the current definition of business process for the alignment of supply and demand. The term
S&OP and its modern meaning were conceived in the 1980s and are generally attributed to Richard Ling, then a consultant with the
management consulting firm Oliver Wight.
APICS defines S&OP as the "function of setting the overall level of
manufacturing output (
production plan) and other activities to best satisfy the current planned levels of
sales (sales plan and/or
forecasts), while meeting general business objectives of
profitability,
productivity, competitive customer lead times, etc., as expressed in the overall
business plan." The
Institute for Supply Management defines it as "working cross-functionally with internal business units to forecast anticipated demand, inventory, supply, and customer lead times based on the sales forecast, actual demand, and capacity forecast." One of its primary purposes is to establish production rates that will achieve management's objective of maintaining, raising, or lowering
inventories or backlogs, while usually attempting to keep the
workforce relatively stable. It must extend through a
planning horizon sufficient to plan the
labor,
equipment, facilities, materials, and finances required to accomplish the production plan. As this plan affects many company functions, it is normally prepared with information from
marketing, manufacturing,
engineering,
finance,
materials, etc." It has also been described as "a set of
decision-making processes to balance demand and supply, to integrate
financial planning and operational planning, and to link high-level
strategic plans with day-to-day operations." == Planning process ==