Which metrics are most crucial for SIOP (sometimes referred to as S&OP or sales and operations planning)? The simple answer is that it is those metrics most vital to running your business.
SIOP aligns not only demand with supply but it also aligns the various business units and functional areas on one plan. Therefore, there are standard metrics which are key to SIOP including:
- Sales revenues – certainly one of the key elements of SIOP is to forecast demand.
- Inventory turns – how quickly you are turning your inventory will have a direct impact on cash flow
- Service levels – this metric will measure how well you satisfy your customers from on-time delivery, complete orders, etc. This is sometimes measured by the “perfect order”.
- Lead time – the shorter your lead times vs. competition, the more likely you’ll be able to grow sales, assuming all else is equal.
- Margins – how well you have aligned demand with supply and optimized your supply chain inclusive of operations, planning, purchasing, distribution etc. will correlate directly to efficiencies and margins.
In addition to these baseline metrics, it is important to also consider other metrics which can be important to your particular business or to your bottom line results. These can include key customer performance, key customer sales vs. forecast, bookings, master schedule adherence, etc.
Start thinking about SIOP as a strategic priority, and dramatic results will follow.