Tag Archive: supply

SIOP/ S&OP and Bottom Line Benefits

July 27th, 2019

According to a Hackett group study, the benefits of SIOP (Sales, Inventory & Operations Planning) can be dramatic.

First, let’s back up to describe SIOP: It is an integrated business process that aligns demand with supply through which the executive/leadership team continually achieves focus, alignment and synchronization among all functions of the organization.

In our experience with over 20 SIOP projects, our clients have experienced these same results (and often even better ones), no matter the industry, company size or priority. Simply put, when done well, you’ll have more cash, profit and revenue. What’s not to like!

The types of results fall into three buckets:

  1. Working capital – Undoubtedly, freeing up inventory to increase cash flow is becoming a greater priority as executives realize just how much cash is tied up in servicing customers’ Amazon-like expectations with global supply considerations. Therefore, it is not surprising that we’ve received a serious uptick in requests to increase inventory turns. SIOP is always a part of the solution. Hackett research says 20-30% improvement is to be expected. We have certainly found this to be true.
  2. Cost reduction – Whether we term this cost reduction or margin improvement, 5-10% improvement is what the Hackett study shows. We have seen these results, even by default (when the SIOP program was focused on improving service). Thus, if they can be achieved by default, they certainly can be achieved with focus! Items that fall into this category include material cost reduction, freight cost reduction, labor productivity improvement, and fixed cost optimization.
  3. Sales growth – According to the study, a 2-4% improvement is not uncommon. We have experienced dramatic results in this area with lead time reduction, on-time delivery performance improvement, customer scorecard wins and strengthened partnerships that lead to new and expanded sales opportunities.

For example, in a significant metals-related aerospace business, we started the SIOP journey to reduce inventory levels to free up debt. By partnering with sales to better understand customer requirements and by better aligning the sites on a single plan and set of priorities, we were able to align demand with supply. It was truly about alignment as the performance measurements couldn’t be completely changed (and they often didn’t support the same decisions as SIOP). Yet, we gained executive alignment and focus. This led to our ability to align the various functional areas on a single objective while still recognizing the site level objectives. Therefore, we were able to reduce the inventory in the core product line by 30% while ensuring customer satisfaction levels were maintained or improved.

The question isn’t whether you’ll benefit from implementing SIOP. The only question relates to what you’ll achieve based on your priority focus. Will it lean in the direction of margins, cash flow or customer loyalty and revenue growth? If you’d like to learn more about how to benefit from SIOP, read about it in our blog, explore our proprietary process for SIOP, 4 Excel or contact us to discuss an assessment.

 

Did you like this article?  Continue reading on this topic:
The Strategic Benefit of SIOP
Have you Thought about Increasing Demand??



Global Manufacturers Struggle to Keep Up with Demand – Are You?

January 17th, 2018

Supply Chain Briefing

According to an Industry Week article, factories across the globe are showing signs of strain in keeping up with demand. China, Germany, France, Canada, the UK and the US all show that capacity might not be keeping up with supply. In fact, the U.S. reading from IHS Markit has reached its highest level since March 2015. Inflationary pressures are surfacing.

Are You Prepared?
This certainly coincides with what we are seeing in the market – if you aren’t preparing in advance, you are likely to be left in the dust. Customers are unwilling to wait or dampen their experience. They’ll find someone who can meet their needs. Are you prepared to meet your demand – and your competition’s?

Details and Planning
I used to work in a paper mill and converting operation like the materials pictured above. Meeting demand is far reaching – just think about the space constraints in storing these materials? Success follows forethought and preparation.

What Should We Consider and/or What Impacts Could Arise?
Do you know your capacity? It certainly seems appropriate to start by understanding your machinery and equipment capacity, your labor capacity, your storage capacity and your suppliers’ capacity to name a few. How much can you increase your volume without running into a wall? 5%, 20% or 50%?

Driving Profitable, Scalable Growth
One of the issues we partner with clients to address is how to drive profitable, scalable growth. Keeping up with growth is one question.  However, perhaps a more important question is whether you can sustain growth and have a scalable infrastructure.

Do you have the people, development programs/skills, processes and technologies in place so that you can grow without adding people at the same rate as your growth?

First of all, with virtually 0% unemployment, it will prove challenging to find good people. Next, even if you are able to find them, think about your ramp up curve for effectiveness. In most manufacturing environments, it can be 3 months to a year to bring a higher-skilled resource up the learning curve. Also, have you thought about what your customers expect in 6 months to a year? Don’t think about their current needs; look beyond if you plan to be their partner in growth.

So the question remains, are you prepared?



SIOP as a Win-Win-Win-Win

June 14th, 2016
4excel-logo-web

LMA Consulting Group offers clients an opportunity to align demand with supply to drive exponential results through our 4Excel proprietary process.

Our favorite end-to-end supply chain project supported a SIOP (sales, inventory and operations planning) project for growth. Although we enjoy SIOP projects as they are one of the best ways to achieve a win-win-win-win of growth, service, margins and cash, this particular client had some complex data and dramatic growth to consider.

SIOP is all about aligning demand with supply — AND the different functional areas of the organization on one page. Accomplish the second, and all else will fall into place. This particular SIOP project was no different.

First, we had to get everyone on the same page with why we were embarking on this project — how would it help the company? And each individual?

Next, we had to get a handle on demand. What were the growth projections? Were we able to “add up” from the details to the same numbers the executives knew to be accurate at the high level? If not, how would we reconcile these matters? There is no need to get lost in details yet we had to be in the same ballpark. Unfortunately it is quite hard to execute a plan if we don’t understand the plan in the first place!

Then, we had to crunch the numbers at a high enough level to not get stuck in the weeds yet at a low-enough level that it would still be meaningful to the people who knew what it took to succeed. We had to get past imperfect data and make sure we were concerned with being directionally-correct. How could we estimate the number of machines, types of machines, number of people, skills of the people — and even buildings required? Should we be off-loading, moving volume within the facility or outsourcing to other facilities within the system? What could we do rapidly while focusing on customer service and customer expectations including margins and cost?

In essence, we brought the best ideas together with SIOP. When it came together into one process and one document, the answers became clear. We had a plan and clarity on how to triple and quadruple the business — and, now we could execute the plan!

Did you like this article? Continue reading on how to be the Strongest Link in your supply chain:

SIOP/ Integrated Business Planning 

How to Accelerate Cash Flow through Supply Chain Innovations