How Do You Know If You Need a SIOP Process?

If your organization is asking the following questions, you need a SIOP process.

Demand Plan/ Sales Forecast/ Customer Growth

• How can we create revenue predictability?
• What is our sales forecast and how close is it to supporting our budget and operational plan?
• What types of products do we plan to sell in the next 6, 12, 18, and 24 months?
• Will our new product development and R&D plans support our growth goals?
• What types of collaborative customer programs should we rollout and incorporate in forecasts to support growth goals?
• Which customer forecasts, quotes, industry trends, market intelligence, and programs and promotions should we consider?

Supply Plan/ Capacity – Operations, Supplier & Inventory Strategies

• What staffing resources and training plans do we need to support the sales forecast?
• What kind of machine and equipment capacity does our Operations team need?
• What storage, distribution, and transportation capabilities and capacity do we need?
• What engineering capacity is required to support our growth plans and customer lead time expectations?
• What supplier capacity and agreements are required to support the sales forecast?
• What level of inventory and related working capital requirements are needed to support our plans?
• Should we change what we make vs buy (offload, outsource, insource, reshore, nearshore, vertically integrate)?
• Should we reallocate capacity and resources in our supply chain network?
• Should we diversify sources of supply and/or change sourcing strategies?
• How can we estimate customer lead times and ATP (available to promise) dates upfront with reliable accuracy for standard and custom products?

Strategic & Financial 

• How do we maximize customer and product profitability? (pricing, rebates, mix, cost, etc.)
• How do we minimize risk in successfully fulfilling our customers’ orders and supporting their growth plans?
• How do we create supply chain resiliency?
• How do we scale rapidly to meet growth goals?
• What are the capital expenditures and funding requirements to support growth goals?
• Do we need to modify our manufacturing and supply chain footprint?

Such questions allow an executive team to formulate a strategy for delivering an agreed upon sales, inventory, and operations plan.  

What is a SIOP Process?

Typically, a SIOP process looks out 12-24 months, allowing for both strategic and tactical decisions to be made. At its core, SIOP will result in a sales plan, an operations plan (manufacturing, purchasing, distribution, logistics, staffing), an inventory plan, and related financial plans (capital, cash, P&L) to support business plans. In essence, it aligns and balances demand with supply.

Every client knows their budget and/or sales forecast in dollars. However, few know what that means in terms of products, units, machinery and equipment, operational employees, engineering resources, quality technicians, planners and buyers, supplier capacities and capabilities, and logistics and transportation resources. Thus, the best clients create a SIOP process and cycle to ensure strategy stays in sync with execution.

Our most successful clients create an “Operational Rhythm,” depicted in this infographic: 

The key to success for clients that create a meaningful SIOP process that is utilized to make key decisions and stay ahead of changing conditions is to follow the SIOP wheel that creates an operational rhythm. Typically, clients will have a sales forecast in dollars, at least in terms of annual revenue expectations. Translating these dollars into meaningful product categories is often core to success. In custom manufacturing environments, it is vital to turn these forecasts into product categories with key attributes that drive material and operational differentiation. Product forecasts are further extrapolated into engineering, manufacturing, supplier, logistics, and sustainability requirements. 

SIOP relies on a weekly and monthly cadence to maintain alignment and respond resiliently to changing business conditions and opportunities for profitable growth. SIOP should include the following process steps with a minimum of a demand planning meeting, supply planning meeting, and an executive meeting, as depicted in this process visual. 

The key to success is to make these process steps meaningful and valuable to driving results. Our most successful clients take the practical, value-based approach to determining which information to include and which meetings add value, and they tweak the process as conditions change. For example, the alignment process can occur behind the scenes if the team works collaboratively as a part of their daily routine. On the other hand, as we roll out education about the SIOP process, it makes sense to highlight this alignment in a specific meeting. We have also had clients such as an aerospace manufacturer that valued this meeting as a vehicle to get Customer Service, Planning, and Operations together to align and determine key issues, bottlenecks, and/or opportunities to bring up in the executive meeting. A drone manufacturer valued the alignment meeting as the vehicle to focus on inventory.