Antecedents to effective sales and operations planning

Abstract

Purpose – Sales and Operations Planning (S & OP) serves as the essential cross-functional process for organizations to match supply in the form of production, inventory, and procurement with customer demand. Given recent studies revealing that S & OP is ineffective for most firms, the purpose of this paper is to investigate the critical antecedents of effective S & OP. Design/methodology/approach – Drawing on agency theory and stewardship theory, the authors develop and test a conceptual model that includes organizational integration, organizational priorities, standardized processes, and organizational engagement. The authors apply partial least squares structural equation modeling of survey data from S & OP practitioners to test the model. Findings – The results confirm the relationships among S & OP antecedents. Organizational integration positively influences a standardized S & OP process, and both the S & OP process and prioritization lead to stronger organizational S & OP engagement. Ultimately, organizational S & OP engagement is positively linked to enhanced operational, market, and profitability outcomes. Practical implications – The findings create a strong practical foundation for executing S & OP. The results also reveal a formal process for operationalizing the link between organizational integration and firm performance that is espoused but not detailed in existing literature. Originality/value – Existing research supports the potential performance impacts of S & OP but has yet to validate how to specifically operationalize S & OP.