For the purposes of sales and operations planning, product groups should be established on the basis of:

In sales and operations planning (S&OP), establishing product groups based on the similarity of manufacturing processes is advantageous for several reasons. When products share similar processes, it enables more efficient production scheduling, resource allocation, and inventory management. This approach allows businesses to streamline operations, optimize workforce utilization, and minimize production costs, leading to improved operational efficiency.

Grouping products by manufacturing processes enhances communication among departments such as production, procurement, and logistics, fostering better coordination and alignment across the supply chain. It also simplifies planning, as variations in processing times and resource requirements can be more easily managed when similar products are grouped together.

While market segments, the availability of materials, and the availability of machinery are important considerations in S&OP decisions, they don't provide the same level of operational efficiency that process similarity does. Market segments focus more on customer demographics and preferences, while material and machinery availability play a role in capacity planning and operational constraints but do not inherently align with production efficiency as much as process similarity does.