3 Core Elements in Demand and Sales and Operations Planning (S&OP)
- Doug Dedman
- 1 day ago
- 3 min read
When we talk about demand planning, it’s easy to get lost in reports, spreadsheets, and models. But at its core, demand planning is built on just three interconnected elements. If you understand these three, you can understand the entire demand picture
The three elements are: Bookings, Shipments, and Backlog.
1. Bookings: The Orders We Expect to Capture
Let’s start with bookings. Bookings are the orders we anticipate bringing in from customers. This is where the sales team plays a central role. Their accountability is to forecast and commit to how much demand they believe they can generate.
Bookings reflect the inflow of new business. Why is this important? Because without a credible bookings plan, the rest of the organization is guessing. Operations doesn’t know what to prepare for, finance doesn’t know what to forecast in revenue, and leadership doesn’t know whether growth plans are realistic.
But it’s not just about a number on a page. A good bookings plan reflects market knowledge and financial health. It ties the business to the outside world and to what customers are actually saying and doing. That’s why bookings are such a critical piece of the demand plan.
2. Shipments: What We Can Realistically Deliver
The second element is shipments. This is about the company’s ability to fulfill demand and to actually put product into customers’ hands. Unlike bookings, which sales is responsible for, shipments are owned by operations.
Shipments answer the question: What can we realistically deliver?
This is where supply constraints, manufacturing capacity, and logistics all come into play. You may have bookings for 10,000 units, but if operations can only produce and ship 7,000 in a given month, then the shipment plan must reflect that reality.
Why does this matter? Because companies that ignore the shipment view often overpromise and underdeliver. They let the bookings plan drive the entire conversation, but if you don’t balance it against operational capacity, you create customer disappointment, backlog explosions, and strained resources. Shipments are the reality check. They ensure that the demand plan isn’t just what we wish we could deliver, but what we can deliver.
3. Backlog: The Bridge Between Sales and Operations
The third element is backlog which represents the orders already in the system that haven’t been shipped yet. Think of backlog as the bridge between bookings and shipments. Backlog answers the question: What commitments have we already made to customers that still need to be fulfilled?
This is where sales and operations meet. Sales created the backlog by bringing in orders. Operations must now manage that backlog by producing and shipping against it. If backlog grows too large, it signals that operations can’t keep up with demand. If backlog shrinks too quickly, it may signal weak bookings or lost sales opportunities. Backlog is also one of the most visible metrics to executives and customers. It directly impacts financial results, customer satisfaction, and even investor confidence. That’s why it can’t be ignored.
Making a Full Picture for your Demand Planning
Now, here’s the key point: these three elements - bookings, shipments, and backlog - are interconnected. You cannot look at one in isolation and claim to understand demand.
A complete demand plan and sales and operations plans must include all three. Together, they provide a full picture:
Bookings tell you what’s coming in.
Shipments tell you what’s going out.
Backlog tells you what’s still waiting to be fulfilled.
So when you hear the term “demand plan,” don’t think of it as just a single number. Think of it as a system of three interconnected views.
At DBM Systems, our consultants have over 20 years of experience providing S&OP leadership to businesses worldwide. We equip teams with coaching and the tools to quickly start and sustainably run an effective S&OP process. Learn about our process and unlock the power of S&OP in your organization.