Sales, Inventory and Operations Planning (SIOP)

Each year your team develops a budget and monitors the performance of the business against a set of assumptions aligned with the business strategies and objectives. The discipline and rigor associated with the feedback loop as the year progresses is an indication of the maturity of your operating plan and cadence.

In most organizations, functional groups adjust their department budgets in relative isolation based on their perception of reality as the year goes by. Those adjustments roll up to a “budget update” that is consolidated and distributed. This update, whether monthly, quarterly or semi-annually becomes the scorecard of the financial success of the business and a reflection of the effectiveness of the business strategies.

SIOP provides an integrated cadence that brings the Budget, Sales Plan, Inventory Plan and the Operations Plan together on a monthly basis to evaluate the inputs and the outputs of the plans together. This structured cadence drives a more proactive approach to business planning and develops a more cohesive and well-rounded leadership team. Key components of a SIOP implementation include;

•The budget – how are we performing against it and what adjustments need to be made?

•A scorecard for the Sales and Operations Teams (components of which likely already exist)

•External factors – what opportunities or constraints are supporting or impeding our success?

•Internal factors – where do we need to focus resources and support to bring the organization into balance?

•Adjustments to the Operating Plan – do business realities (positive or negative) require that we adjust our expectations?

The SIOP Journey

The team will build a common language for the SIOP process, starting with agreed upon assumptions about product families, service level targets, and how the business will be reviewed. One of the more challenging components of SIOP is the translation of demand into load and requirements (labor, machine and materials) and this model is never perfect and continually refined over time. Finally, a dashboard and cross functional monthly review cadence will provide insight and accountability across the business as the team continually optimizes the capacity of the business (inventory and operational capacity) against the sales plan.

SIOP Results

Organizations with a dynamic SIOP cadence are at the forefront of operational planning. The team has the SIOP process as a platform to tackle business opportunities and challenges together, leveraging insights that are often missed through the more traditional and disconnected roll up process.