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Leading Supply Chain StrategiesThis Blog is dedicated to
bringing viewers and members the best supply chain practices,
methods and technologiesfor surviving the rapid changes in markets
and positioning your company for future growth. Please feel free to
addyour comments. Ed. Nagy
Saturday, October 29, 2011
Is SIOP (Sales Inventory and Operations Planning) the
nextgeneration of S&OP?Im sure many of you have heard of
S&OP (Sales and Operations Planning). However, many
companiesare now focusing more attention on an extension of this
concept and are referring to it as SIOP (Sales,Inventory and
Operations Planning).
What is SIOP?
SIOP is a set of integrated and transparent business planning
processes that helps an organization
balance supply and demand requirements while maximizing cash
flow and business profitability. Theseprocesses are both
interactive and collaborative which provide global visibility and
insight to facilitateeffective cross-enterprise performance
planning. Ideally, these processes optimally synchronize
demandplans, inventory plans and supply plans to support business
revenue and profit objectives. In a nutshell,SIOP tells businesses
to produce or supply the right products in the right quantities at
the right times, atthe right cost.
What is so different?
SIOP enables a firm to create new supply & demand plans and
quickly see how these plan(s) impactother functional areas. This is
achieved by bringing together demand plans and forecast data
frommultiple sources. These sources are internal (such as
Sales/Marketing, Development,Procurement/Sourcing, Finance,
Manufacturing or Production and Logistics) and can be external
(such as
trading partners, retailers, distributors or suppliers). SIOP
maps out relationships between businessplans and forecasts from
various functional groups and provides the opportunity to conduct
extensivewhat-if analysis not only on supply plans but finance
plans as well.
Traditional S&OP processes typically assume you will
evaluate one or maybe two supply & demandplans. SIOP can
process and evaluate multiple supply & demand plans. This can
be especially useful inplanning sales promotions or new product
introductions. Many times companies will plan three basicscenarios:
a baseline (S&D Conditions most likely to occur), along with an
optimistic and a pessimisticscenario. All of these views require a
reconfigured workable supply plan.
By developing different supply and demand scenarios (baseline,
optimistic, pessimistic), businesses canoptimize profitability and
be better prepared to react during unexpected supply or demand
shifts. Byvisualizing alternative supply and demand situations SIOP
can help you to identify supply or demand-shaping opportunities
that might go by unnoticed with other planning methods.
SIOP allows you to define and target customer service levels
then develop an optimal inventory mix thatcan buffer potential
upstream and downstream supply chain fluctuations. Having this
optimized inventorymix helps your business meet its service level
targets while doing it with fewer inventories. In addition,
theprocess allows you to make fact-based trade-offs or deviations
in the planning process when you deemnecessary. Your business can
now recognize and manage the interdependency of target service
level sand inventory investments when deciding how to achieve their
business objectives. If your firm usesrough-cut capacity planning,
SIOP can help you to better control inventory, capacity and to use
resourcesmore cost effectively to deliver products on time and on
budget.
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