S&OP: why many Italian SMEs skip it, and what that costs them

The symptom you see in many companies

Monday. The sales director promises tight delivery dates to close the order. Wednesday. The production director hears about it once the promise has been made and points out that those dates will not hold. Friday. The managing director has to arbitrate between the two with no shared data to lean on.

It is called management by emergency. Many companies experience it as flexibility, and in part it is: it is the same responsiveness that lets them take orders others turn down. The problem starts when it becomes the only way of working.

The remedy is S&OP, Sales & Operations Planning. It is not a new acronym: it is a method established in the 1980s that still holds up. The difficulty is not understanding it, it is keeping it going month after month.

What S&OP actually is

S&OP is a structured meeting, ideally monthly, in which each function brings its part of the picture.

1. Sales brings the consolidated demand forecast: orders already won, live negotiations, new product launches, seasonal patterns.
2. Production brings the capacity plan for the months ahead: machines, people, shifts, planned maintenance.
3. Purchasing and the warehouse bring the materials plan: supplier delivery times, the stock to hold, materials that are hard to source.
4. Finance brings the economic constraints: how much capital can stay tied up, the margins, the cash coming in.
5. Leadership brings the objectives: the reliability promised to customers, how many weeks of stock to hold, which products to push.

Once a month, everyone decides together what to do over the months ahead: how much capacity to add, which stocks to build, which orders to accept.

This is not an operational meeting. Tomorrow is not on the agenda: the quarter is.

The objections we hear most often

1. "We have no time to plan, we have to produce." The hours spent today chasing emergencies move to planning, and planning takes fewer of them than a week of emergencies burns.
2. "The forecast is always wrong anyway." True. But an imperfect forecast made with a method is still more useful than none at all: you measure how far off it is, you reduce the error over time, and meanwhile you work with a range rather than a single figure.
3. "Sales won't accept constraints." That is understandable: their job is to bring in orders. But it is the same sales team that takes the damage when deliveries slip. S&OP exists to close that paradox: sales signs off on the forecast, production commits to the capacity. A mutual commitment, written down.
4. "We don't have the numbers." Almost always they exist, but scattered. The first shared picture — demand, capacity, stock — can be built quickly, even with the ERP and a spreadsheet, and the cost of that stage is agreed before it starts.
5. "There is nobody to run it." This is the real obstacle. If nobody is explicitly responsible for holding forecast and plan together, the meeting is dropped the first busy month. In a company of this size it usually does not need a full-time role, but it does need someone who stays with it.

What changes when S&OP works

How much you improve depends on where you start, and the starting point is measured on your own data before anything begins: without it, any percentage is just a word. What does change, for certain, is how decisions get made.

• Deliveries improve without buying machines. You stop promising dates the capacity cannot support, so fewer of them slip. How much room there is to improve is estimated at the outset, from the last twelve months of delivery data: without that starting point, any improvement is just an opinion.
• Safety stock is calculated rather than guessed. You start from actual consumption and from how much demand really swings, and recalculate what genuinely needs to sit in the warehouse.
• Rush jobs stop arriving through the back door. Every new request goes through the shared plan first, instead of reaching the shop floor by phone.
• Investment follows evidence. Machines get bought when the plan shows a department is systematically the bottleneck, not because a delivery has been promised.
• Disagreements between departments surface earlier. They come out in the monthly meeting, while there is still time to act, rather than on the shop floor at the end of the day with the order already late.

The trap: the meeting that decides nothing

The typical way this fails: the monthly meeting takes place, but

• there is no shared data, and everyone arrives with their own spreadsheet;
• nothing is signed off;
• production ignores the sales forecast, "because it's wrong anyway";
• nobody ever measures how close the forecast came to actual sales;
• leadership attends one time in three.

The meeting exists, but it does not decide anything. It shows up quickly: by the third or fourth round, if on-time deliveries have not moved and rush jobs have not fallen, the meeting is a formality.

How to actually start

A realistic sequence for a manufacturing SME.

1. First two months: define the scope (lines, product families, markets), the owners and the cadence. Put a shared set of data in place, even if it is just the ERP plus a spreadsheet.
2. Third and fourth month: the first real meeting. Start with a short horizon, three months, and extend it once the routine holds.
3. From the fifth month: measure everything — how close forecasts come to actual sales, on-time deliveries, stock, rush jobs — and adjust the meeting each round.
4. Towards the end of the first year: connect the APS to the process. The APS becomes the tool that turns S&OP decisions into weekly production plans.
5. From the second year on: the meeting is part of how the company works. People complain when it is skipped, not because it exists.

The hard part

S&OP is not an IT project and it is not a piece of software you buy: it is a way of deciding that the company builds, and that tools then support. It needs the owners to genuinely believe in it, someone to stay with it, and the discipline not to skip the meeting.

That is why many SMEs do not do it: buying software is easier than changing the way decisions are made.

But once the meeting starts genuinely deciding, most of them find they already have capacity available — currently absorbed by rush jobs, wrong stock levels and mid-week changes of plan. There is nothing to buy: it is already there.