Scenario planning aims to map alternative realities as accurately as possible. This makes planning more resilient to uncertainties and dynamic changes. Unlike a classic forecast, which usually only depicts one expected future scenario, scenario planning works with several alternative future scenarios – such as a best case, worst case, and most likely case.
In the context of sales and operations planning (S&OP), scenario planning creates a sound basis for operational and tactical decisions. It highlights uncertainties (e.g. changes in the market, fluctuations in demand, trade conflicts) and provides alternative courses of action.
Integrating scenario planning into the S&OP process offers decisive advantages. It strengthens resilience to uncertainty and enables early identification of risks and opportunities. Instead of relying on a single forecast, decision-makers gain a well-founded overview of several possible future scenarios. This improves the quality of tactical planning and helps to use resources more efficiently – for example, through flexible production, procurement, and sales strategies. Companies that actively consider scenarios can react more quickly to market fluctuations, avoid bottlenecks, and thus secure competitive advantages. In addition, scenario planning promotes proactive risk management: instead of being surprised by events, action plans for various developments are already in place. As a result, scenario planning increases planning reliability.
Successful scenario planning in the S&OP process requires a wide range of input variables. These include historical data on sales, production, and inventory, as well as market and industry trends, supplier and logistics data, and external factors such as economic developments, political conditions, and technological innovations. Assumptions about possible disruptions – such as natural disasters or geopolitical crises – can also be incorporated into scenario design.
The output of scenario planning consists of clearly defined, calculated future scenarios, including their impact on key KPIs such as revenue, delivery capability, inventory, or costs. These scenarios form a sound basis for management decisions and contingency plans. In addition, concrete recommendations for action and measures can be derived from them in order to be able to react quickly and effectively to various future developments.
Those who have not yet used scenario planning in their own S&OP process can start gradually. First, an interdisciplinary team (e.g., S&OP team) should be formed to identify relevant influencing factors and draft initial basic scenarios. Close integration with existing planning processes is crucial. The scenarios should be based on the same data as demand planning, supply planning, and financial planning.
It is important to update the scenarios regularly and incorporate them into the S&OP meeting so that they actually serve as a basis for decision-making.
Dombrowski, J. / Klinglmayr, G.
