--- title: "Improve Profit and Loss: Get Directly Involved in S&OP" description: The best way to improve profit and loss (P&L) within your company is to get directly involved with your company's S&OP Process. This post tells you how image: https://download.riverlogic.com/hubfs/Blog_Images/Fotolia_69474500_Subscription_Monthly_M.jpg --- ### Get in Touch [![logo](https://download.riverlogic.com/hs-fs/hubfs/logo.png?width=3153&height=398&name=logo.png "logo")](http://riverlogic.com) [![logo-hover](https://download.riverlogic.com/hs-fs/hubfs/logo-hover.png?width=3153&height=398&name=logo-hover.png "logo-hover")](http://riverlogic.com) - [Solutions](http://www.riverlogic.com/solutions) - [Capacity Planning](https://download.riverlogic.com/solutions/capacity-planning) - [Commodity Trading & Logistics](https://download.riverlogic.com/solutions/commodity-trading-and-logistics-optimization) - [Product Mix & Customer Profitability](https://download.riverlogic.com/solutions/product-mix-customer-profitability) - [Production Planning](https://download.riverlogic.com/solutions/production-planning-and-scheduling) - [Sales & Operations Planning](https://download.riverlogic.com/solutions/sales-and-operations-planning) - [Sourcing & Procurement](https://download.riverlogic.com/solutions/sourcing-and-procurement-optimization) - [Supply Chain & Logistics Optimization](https://download.riverlogic.com/solutions/supply-chain-optimization) - [Supply Chain Network Optimization](https://download.riverlogic.com/solutions/supply-chain-network-optimization) - [Trade Promotion Optimization](https://download.riverlogic.com/solutions/trade-promotion-optimization) - [Industries](https://download.riverlogic.com/industries) - [Building Products](https://download.riverlogic.com/industries/building-products) - [Chemicals](https://download.riverlogic.com/industries/chemicals) - [Consumer Packaged Goods](https://download.riverlogic.com/industries/consumer-packaged-goods) - [Food and Beverage](https://download.riverlogic.com/industries/food-beverage) - [Manufacturing](https://download.riverlogic.com/industries/manufacturing) - [Mining & Metals](https://download.riverlogic.com/industries/mining-and-metals) - [Oil & Gas](https://download.riverlogic.com/industries/oil-and-gas) - [Pharmaceuticals](https://download.riverlogic.com/industries/pharmaceuticals) - [Pulp & Paper](https://download.riverlogic.com/industries/pulp-and-paper) - [Utilities](https://download.riverlogic.com/industries/utilities) - [Technology](https://download.riverlogic.com/technology/prescriptive-analytics-platform) - [Our Platform](https://download.riverlogic.com/technology/prescriptive-analytics-platform) - [Prescriptive Analytics](https://download.riverlogic.com/technology/prescriptive-analytics) - [Resources](https://download.riverlogic.com/resources) - [Blog](https://download.riverlogic.com/blog) - [News](https://download.riverlogic.com/news-2) - [Testimonials](https://download.riverlogic.com/testimonials) - [Partners](https://download.riverlogic.com/partner-program) - [Our Partners](https://download.riverlogic.com/our-partners) - [About Us](https://download.riverlogic.com/about-us) - [Contact Us](https://download.riverlogic.com/contact-us) - [Our Board](https://download.riverlogic.com/board-of-directors) - [Our Leadership](https://download.riverlogic.com/leadership) - [Careers](https://download.riverlogic.com/careers-current) - Get in Touch Get in Touch [![Get in Touch](https://hubspot-no-cache-na2-prod.s3.amazonaws.com/cta/default/484375/8a2efec4-88ad-40a3-bc49-91f4a5e57e38.png)](https://hubspot-cta-redirect-na2-prod.s3.amazonaws.com/cta/redirect/484375/8a2efec4-88ad-40a3-bc49-91f4a5e57e38) Share This [mailto:?subject=Improve%20Profit%20and%20Loss:%20Get%20Directly%20Involved%20in%20S&OP&body=https%3A%2F%2Fdownload.riverlogic.com%2Fblog%2Fimprove-profit-and-loss-get-directly-involved-in-sop](mailto:?subject=Improve%20Profit%20and%20Loss:%20Get%20Directly%20Involved%20in%20S&OP&body=https%3A%2F%2Fdownload.riverlogic.com%2Fblog%2Fimprove-profit-and-loss-get-directly-involved-in-sop) # Improve Profit and Loss: Get Directly Involved in S&OP In a recent survey of companies using advanced S&OP systems, Gartner identified the key characteristics of companies that have reached Stages 4 and 5. **The highest performers assign a P&L owner or senior executive to lead the process** (see the definitions and a summary on “Gartner S&OP User Survey Lays the Path for Successful S&OP”). The survey doesn’t explain why, but it does provide some clues. For example, it highlights that as they make efforts to mature their S&OP processes, **companies struggle to establish a stronger link with business outcomes.** > **The primary reason a P&L owner should be directly involved is the impact on performance — potentially as much as 3-5% of revenue in additional profits.** Furthermore, it can affect other corporate and business unit objectives such as growth, return on assets, ability to meet sustainability targets and risk. S&OP is a critical juncture where demand and supply meet, but unfortunately it is too focused on balancing the two vs. making important decisions that impact the business. For example, most companies at one point or another face a forecasted product shortage. Their first reaction is to do everything they can to meet demand, including building ahead, running the lines on Sundays or contracting with co-packers. If the shortage is likely to persist, they then use “fair share” rules to determine which products, regions and customers will get shorted. **Very few evaluate the situation from a financial angle to ask the question: is meeting this demand even profitable?** Or whether the customers they will short are the least profitable? Even fewer take this information and go back to their commercial teams to determine whether they can proactively [shape demand](https://download.riverlogic.com/optimize-supply-and-demand-through-demand-shaping) — for example reducing the emphasis on promotions. Tellingly, often times **heavy promotions and extreme supply chain reactions to meet the extra demand generated combine with adverse effects and result in marginal or negative contribution** from the campaigns. Unfortunately, most companies don’t know this until after the fact — they use standard costing to estimate the expected contribution from their campaigns, so how could they? ### 7 Questions Profit and Loss Owners Should Ask to Drive S&OP Success S&OP can do so much more, **but only the profit and loss owners have the visibility, incentives and ability to drive a broader set of questions into the process that can align and increase its impact on business outcomes.** Consider these questions: Most S&OP processes today remain focused on operational metrics and are run by people whose role and incentives limit their ability to broaden their impact. Nevertheless, S&OP remains the single focal point where a company has a unique chance to optimally decide which products, which demand, which inventory/supply plan and what targets are most important relative to maximizing their business objectives. Strong participation from P&L owners in S&OP will not only ensure the right questions are asked, it will also **ensure that the key decisions around the trade-offs evaluated are made in alignment with company objectives.** It’s not easy. Then again, how many alternatives does a P&L owner have to capture 3-5% of revenue in additional profits? **[![Wow Your C-Suite with 8 S&OP Strategies](https://hubspot-no-cache-na2-prod.s3.amazonaws.com/cta/default/484375/4dfdcd81-e631-428a-96d8-0233363430d7.png)](https://hubspot-cta-redirect-na2-prod.s3.amazonaws.com/cta/redirect/484375/4dfdcd81-e631-428a-96d8-0233363430d7)** You May Also Enjoy Reading [Three Steps to Mastering Prescriptive Profit Maximization](https://download.riverlogic.com/blog/three-steps-to-mastering-profit-maximization)…[(Read More)](https://download.riverlogic.com/blog/three-steps-to-mastering-profit-maximization) #### About River Logic We’re on a mission to ensure companies across the globe drive maximum value with every decision they make, no matter how complex. 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