Sales, Inventory and Operations Planning (SIOP) is a process that manufacturers and distributors utilize to align supply with demand. What are the key benefits?
- Happy customers: Lately, I’ve seen this objective rise in importance – customers want more for less NOW. Lead times must decrease! The SIOP process can have a direct impact on on-time-delivery percentages, past due dollars and lead times.
- Increased margins: One of the key benefits of aligning demand with supply is that it provides the opportunity to increase production efficiencies (because you have more time to plan effectively), increase logistics efficiencies (by having more time to optimize and through customer collaboration opportunities), reduce purchase spend (with a longer forecast, there is opportunity to develop contracts and collaborate with suppliers), and increase revenues (through customer partnerships).
- More cash: By balancing demand with supply, you have more of the right items at the right place at the right time. Thus, inventory levels can decline without negatively impacting service levels. Thus, cash is freed up for better investments.
- Improved teamwork: The SIOP process has also proven extremely effective in bringing cross-functional teams together to agree on one plan. Although it doesn’t sound difficult, I’ve worked with countless companies that have multiple plans – one for Wall Street; one for sales, yet another one for production and potentially yet one more with new product development goals. Once everyone is working from the same sheet of music, results follow and morale improves.
- Increased revenues: What else could you ask for to round out the benefits? By collaborating with customers on their demand (and often on collaborative inventory programs), you become a dependable, more valuable partner. I’ve seen volumes increase multiple times as a result.