The second critical plan that emerges from the S&OP process is the demand plan, where sales and marketing make plans about what should be sold and marketed, and when, given the supply capabilities of the firm. As mentioned above, demand plans may involve suppressing demand for products or services that are capacity constrained, or shifting demand away from low-margin products to high-margin items. These plans must be reconciled with the financial plan, which manages resource costs against performance projections.
Other authors have discussed how to effectively manage the S&OP process within organizations (see, e.g., Lapide 2002), but this is beyond the scope of this chapter. It is important, however, to understand the critical role that sales forecast- ing plays in the overall planning activities of the firm. Without accurate and credi- ble estimates of future demand, it is impossible for organizations to effectively manage their global supply chains.