“SIOP” stands for Sales, Inventory, Operations Planning (SIOP). Depending on the industry or organization, you may also hear it referred to as “S&OP” or Sales and Operations Planning. Sometimes, it is even referred to as “IBP” or Integrated Business Planning. Typically, they mean the same thing. The most important words to emphasize are planning and alignment.

In SIOP, the goal is to have Sales, Operations, R&D/ New Products & Finance, all planning together. The mission is to align a sales plan and the associated operations plans, to provide superior customer service and profitability.

Today we’re going to explain everything you need to begin an SIOP process. Here’s what we’ll cover:

How Do You Know If You Need a SIOP Process?

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

  • What is our budgeted sales forecast?
  • What types of products do we plan to sell in the next 6, 12, 18, and 24 months?
  • Which customer forecasts, quotes, industry trends and market intelligence should we consider?
  • 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 supplier capacity and agreements are required to support the sales forecast?
  • What inventory level and working capital is required to support our plans?
  • Should we change what we make vs buy (offload, outsource, insource, reshore, nearshore)?
  • 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: 

SIOP Process

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. 

SIOP Process Steps

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. 

What Are the Benefits of SIOP?

SIOP will deliver powerful results. Three key results include:

  • Sales growth & revenue predictability
  • EBITDA, Margin & Cost Improvement
  • Cash flow improvement (inventory optimization)

We reviewed LMA client results over a twenty-year period, and these three overarching results have been substantial. 

SIOP Results

* Note: based on LMA client results. Results are based mainly on mid-market & large manufacturers. Opportunities vary by business and industry.

Our clients have achieved 5-50% sales growth, 5-20% margin/ cost improvement, and 20-50% inventory reduction. Expanding on these key results:

  • Sales growth: Every client that pursues SIOP is interested in growth. Whether the focus is on increasing customer service levels with improved customer service and delivery performance (OTIF, on-time-in-full, lead times), ensuring customer growth is supported successfully with new product launches, revenue predictability, and scaling operations appropriately, or providing the strategic insights to capture market share and grow the business, SIOP maturity will support sales growth plans. 
  • Margin gains: Although most clients don’t mention increased profitability, every client is interested in better predicting margins and driving improvements. SIOP is well-positioned to drive not only cost reductions (resource and labor productivity, increased throughput, improved automation and use of ERP and related technologies, labor, material and freight improvements) but also drive price improvements (customer and product profitability analyses, margin opportunities, pricing trends). 
  • Working capital improvement: Inventory is both a strategic input to the SIOP model and the output as sales and operations teams execute the plan. Since optimizing inventory is dependent on forecast accuracy, supply chain visibility, operational excellence, supplier reliability, process disciplines including inventory accuracy, planning prowess, and business resiliency and predictability, SIOP brings these elements together and can deliver powerful results.

SIOP results in these types of benefits:

  • Improves the predictability of the revenue plan
  • Reduces risks and costs to supplying the revenue plan
  • Gains predictability, consistency, and stability in business planning
  • Creates involvement & engagement across the organization
  • Develops a consensus forecast and provides the best picture of future demand
  • Supports customer growth and the ability of the organization to scale
  • Increases customer service levels (OTIF, lead times)
  • Improves operational efficiencies and performance
  • Increases supplier performance and cost structure
  • Increases margins, EBITDA and working capital
  • Cultivates an operational rhythm
  • Balances sales, inventory & operational plans

SIOP Case Studies: Client Examples

Implementing a SIOP process allows the organization to integrate core processes to scale and achieve financial goals. In the video below, listen to an LMA client talk to the benefits of implementing a SIOP process:

Challenge and Opportunity:

At Schenck Process, the need to synchronize their operations with fluctuating market demands presented both a challenge and an opportunity. They recognized the potential of SIOP to create a predictable revenue stream, streamline their processes and enhance responsiveness to customer needs.

Strategic Implementation:

  • Building a Sustainable Business Rhythm: Schenck Process focused on establishing a rhythm in their business operations that could better balance demand, capacities, and inventory. This strategic alignment was crucial for staying ahead of customer demands.
  • Emphasizing Visibility, Predictability and Stability: With SIOP, Schenck Process improved their order demand visibility and operational predictability, which in turn enhanced their financial forecasting and customer delivery performance. This was particularly evident in their ability to scale up production to meet growth goals while successfully managing OTIF (On-Time-In-Full), a critical customer service metric during unstable times.

Deep Dive into Data and Processes:

  • Continuous Engagement: In the video above, Rick Moroski from Schenck Process emphasizes that SIOP is not a static, one-time setup but a dynamic and continuous process across the organization and end-to-end supply chain. It requires ongoing engagement across various levels of the company to succeed.
  • Harnessing Data: Understanding and integrating data sources was a cornerstone of Schenck’s strategy. They worked on cleansing, normalizing, and connecting this data to form actionable insights. This data was imported into our SIOP model platform, resulting in business intelligence and predictive analytics for strategic and tactical decision-making. 
  • System and Process Optimization: Identifying and addressing gaps in their systems and processes was key to improving their demand sales forecasts, capacity plans, and enhancing their revenue predictability and their operational and inventory performance. This effort helped build a strong foundation for the connectivity and discipline needed in their ERP and supporting systems.

Outcomes:

  • Company-Wide Collaboration: The implementation of SIOP fostered involvement and collaboration across all functions, touching upon demand management, order fulfillment, master planning, and execution. This engagement led directly to exponential results.
  • Revenue Predictability: The company went from ever changing revenue estimates to pinpointing sales forecasts at a high level of accuracy so that the organization could plan ahead.
  • Sales Growth: Significant sales growth of greater than 20% per year was achieved during a period of heavy disruption, thereby exceeding sales growth goals. 
  • Supply Chain Visibility: A key benefit of SIOP is that the SIOP team gained visibility into the demand plan and how that translated into supply plans for key work centers and commodities so that resources could be allocated, strategic decisions made (such as make vs. buy and margin improvement opportunities), and business goals achieved.
  • Enhanced Operational Efficiency & Throughput: The disciplined approach to SIOP resulted in measurable benefits including machine shop throughput, scaled up capacity, and increased efficiencies.
  • Inventory levels: As demand and supply processes improved, substantial inventory was reduced, thereby freeing up cash flow.

Moving Forward:

The journey of Schenck Process with SIOP illustrates the transformative potential of integrating sales, inventory, and operations planning into the core business strategy. Schenck continues to invest in SIOP because they’ve seen firsthand the transformational power of this process.

Additional case studies

For additional case study examples and SIOP testimonials, refer to our results webpage. Listen to a few client examples:

Quick Recap:

In working with Nellson, we rolled out a SIOP process with a focus on demand planning for a contract manufacturer in the food industry, and we utilized that demand plan to create a 4-month production plan and utilize a production wheel scheduling process to drive customer, operational, and inventory performance. We improved customer service levels from the low 90%s to the high 90%s, reduced inventory on hand by 50%, and recouped significant revenue in expired inventory. 

Similarly, in partnering with Armacell, a building products manufacturer, we upgraded their SIOP process with a focus on developing a collaborative sales forecast by key product group and market segment and translated these details into capacity and operational plans (manufacturing and distribution). By further leveraging SIOP, better utilizing their ERP system, and upgrading processes, they gained visibility into their demand plans and order backlog and dramatically improved customer service levels from the 40%’s to the 90%’s while optimizing operational performance and better managing inventory levels.  

SIOP and MRP: A Strategic Partnership

Material Requirements Planning (MRP) is a core system used to plan and manage the inventory, components, and resources necessary for manufacturing products efficiently. It ensures that the right materials are available at the right time, optimizing production and minimizing waste.

At its foundation, MRP starts with the bill of materials (BOM)—a detailed list of all raw materials, components, and subassemblies required to produce a finished product. From the BOM, the system generates a Master Production Schedule (MPS), which outlines precisely when each component needs to be produced or procured to meet production timelines.

Where does SIOP fit in?

While MRP focuses on the detailed, tactical execution of production plans, SIOP operates at a higher strategic level. SIOP takes the outputs of MRP—production schedules, inventory needs, and capacity requirements—and integrates them into a broader business framework. In essence, MRP answers “What do we need to produce, and when?” while SIOP asks, “How do we align these production plans with our business goals, financial targets, and customer demand?”

By incorporating MRP data into the SIOP process, organizations ensure that tactical plans are not only feasible but also aligned with overall business strategy. This partnership enables companies to optimize resources, improve service levels, and drive profitability.

SIOP & ERP: Partners for Scalable, Resilient Operations

Enterprise Resource Planning (ERP) is a business management software system that integrates core business processes across an organization into a single unified platform, and it serves as the backbone system that captures real-time data across functions—sales, inventory, production, and procurement. 

It supports the daily processes and workflows to take orders, plan production, purchase and receive materials, manage work orders on the production floor, distribute product, ship and invoice orders, manage inventory, and much more. ERP systems are required to run a business. Companies typically use a small portion of the capabilities of their ERP system, closer to the 20% of an 80/20 equation. Thus, we have yet to come across a client situation that couldn’t benefit from upgrading the use of critical functionality of their ERP system.   

How does SIOP fit in?

SIOP and ERP are powerful tools that, when integrated effectively, can transform a business’s ability to plan, execute, and grow profitably. ERP transaction data feeds the SIOP strategic framework that aligns demand with supply while ensuring inventory levels, capacity, and resources are optimized to meet customer expectations and support financial goals. SIOP is also embedded into ERP workflows so that companies can gain the visibility and agility needed to respond to market shifts, reduce excess inventory, improve service levels, and drive cross-functional accountability. Together, they provide the foundation for scalable, resilient operations.

SIOP & AI: Accelerating Success

Artificial intelligence (AI) is the capability of machines, especially computer systems, to perform tasks that typically require human intelligence. Manufacturers and distributors are using AI to transform businesses and traditional planning processes. For example, it enables predictive maintenance, smarter forecasting, autonomous planning, and real-time decision support, unlocking efficiencies and competitive advantage. Rather than replacing humans, effective AI augments human capability, helping leaders make faster, more accurate, and more strategic decisions in complex environments. AI will power future business success!

How does SIOP fit in?

SIOP and AI are a powerful combination for driving agility, scalability, and profitability in supply chain and operations. While SIOP provides the structured process to align demand, supply, and financial plans, AI enhances this process by delivering predictive insights, real-time scenario analysis, and automation that elevate decision-making. AI is incorporated in both the demand and supply components of SIOP which enables faster and more confident decisions, proactive risk mitigation, and dynamic re-planning in response to disruptions.

Results are accelerated when AI tools are integrated into ERP systems and aligned with the SIOP cadence—turning static plans into responsive, data-driven strategies that support profitable growth. The result is a more resilient, future-proof operation that aligns with today’s volatility and tomorrow’s opportunities. Bottom-line results explode with business growth, EBITDA and margin improvement, and accelerated working capital.

Do You Need SIOP Software?

We take an uncommon common-sense view of whether you need SIOP software. The client results we have achieved are dramatic. We have developed a SIOP platform software that we utilize as needed. No two clients are alike. We use whatever makes sense of the following types of systems in conjunction with our SIOP platform:

  • ERP & related systems (MRP, DRP, eCommerce, etc.): In 100% of projects to date, we have also worked with the client to upgrade the use of their ERP system to better support SIOP results. ERP is used for inputs and outputs (used for execution) of the SIOP model platform and process.
  • CRM system:  We utilize their customer relationship management system and partner with the client to better utilize their CRM system and related customer and sales information to better support SIOP.
  • Configuration & quoting systems: Quotes can be leveraged from the CRM system in some situations; however, in other cases (such as ETO, CTO and custom manufacturing), we utilize the configuration and quoting systems and partner with the client to better utilize these technologies to support SIOP improvements.
  • Sales forecasting: If the client has a sales forecasting or demand planning module, we will utilize it as part of the SIOP process and roll out enhancements to improve the demand plans as part of the SIOP process. Otherwise, we will utilize our SIOP platform with a base statistical forecasting module to start the process rapidly. If the client requires advanced functionality such as heavy promotions for consumer products, we will assess and recommend the appropriate demand planning software to connect with our SIOP platform.
  • Advanced planning: If the client has an advanced planning system, it will be utilized in the SIOP process in conjunction with the SIOP platform and related technologies. There is some advanced planning functionality built into the SIOP platform. With this base, dramatic progress and results will occur. However, in some situations, it will make sense to further expand functionality. In this case, we will assess and recommend the best fit software to utilize to drive additional value.
  • BI system: Business intelligence systems are valuable for graphically displaying information and slicing and dicing capabilities. If the client has a system such as Microsoft Power BI, we will utilize it. In addition, we will leverage the capabilities in the SIOP model platform to supplement in the near-term and upgrade the client’s use of BI in the longer term.
  • Other AI & Advanced technologies: There are many other systems that can add value to demand and supply processes that utilize AI and other advanced technologies such as digital twins, robotics, etc. Using a commonsense approach to utilize what will add value for strategic and tactical decisions is the best approach. 

How does the SIOP platform relate to these software systems? Our SIOP platform combines data and information from multiple systems (ERP, CRM, quoting, etc.), incorporates business rules, SIOP designs, and data maps, normalizes the data (addressing data integrity issues, missing data, etc.), performs appropriate functions (calculating base forecasts, assessing order patterns, calculating capacity plans (machine, labor, storage, transportation), and develops charts and graphs that will be utilized as a part of the SIOP process. It incorporates predictive capabilities as well as digital twin and AI type functionality to drive SIOP results. The SIOP platform is essential in providing the appropriate information for executives to make decisions, set strategy and address key bottlenecks. Equally important is building sustainability into the process by transitioning the SIOP platform capabilities, data sets, and models to the client.

What do I need to implement a SIOP process (CEO must read)

You likely already have everything you need to begin the SIOP journey.

We recommend you don’t wait for the perfect software or tools to begin. Sure, an advanced ERP, supply chain planning, and/or business intelligence software could prove useful. But we have several clients who have used Microsoft Excel, potentially in combination with our SIOP model platform to successfully support SIOP and gain significant results.

Instead, focus on these resources and key items that will be needed for SIOP:

  1. Collaboration – SIOP will only work if all the stakeholders are committed to participate. Results extrapolate when Sales, Operations, Engineering, Finance, Supply Chain, other related departments brainstorm and interact collaboratively to align on a collaborative plan. Simply aligning key departments on the same page with sales forecasts, capacity and operational plans, supplier forecasts, strategic opportunities to reallocate production and/or realign the supply chain, and margin opportunities will deliver bottom-line results.  
  2. Executive Champion – For SIOP to be effective, there needs to be someone in the executive position who supports the process to help obtain key resources, information and frees up bottlenecks as needed. In essence, he/she clears the path so that the team can be successful.
  3. SIOP Leader – If you have a SIOP leader you could assign as a project manager in-house, you’ll be in an ideal position. If not, you can assign a point person to coordinate the process internally and gain external assistance to provide the expertise for an interim period. Not all SIOP processes are alike. Some require a full-time leader, and others are successful with a part-time focus.
  4. Key stakeholder input – Your champion and/or team should interview key stakeholders and sponsors to ensure the process will achieve key objectives for the organization and provide meaningful insights for decision-making.
  5. Assessment – Your organization will need to assess the state of your demand and supply business processes and systems, compare them to the desired end state processes, and identify gaps to be addressed to support the rollout of SIOP. For example, the assessment will cover the current state and base requirements for the future state of your demand, supply, capacity, visibility, inventory, use of ERP, etc. The assessment results will guide the process on bridging the gap between supply and demand.
  6. Pilot Process – You’ll want to put together a pilot that you can roll out within a reasonably quick period of time for a group of products, customers, or facilities/ divisions so that you can test your SIOP process and modify as required before rolling out across the organization. This is crucial in achieving quick wins, gaining momentum, funding the project with a quick payback, engaging the team, and adjusting business processes, systems and data as needed to ensure long-term success. 
  7. IT Support and Data Analyst – There is always a lot of data to sift through as part of the SIOP process (ERP, CRM, spreadsheets). Knowing how to extract the appropriate data, synthesize data from a directionally correct point-of-view, and turn data into insights will be key to success. With that said, you don’t want to let data become a bottleneck to progress. You’ll want to identify the appropriate IT and/ or data specialist support (internal or external) to help navigate the process.  

Although you need to have a plan for these key items, you do NOT need perfection to start. In fact, our most successful clients use the Pareto principle and take quick, directionally correct steps forward, and continually modify and incorporate key learnings and/or changing conditions along the way. 

How long will it take to implement SIOP? 

It depends. The answer will be dependent on the following:

  • Your SIOP resources and plans to address the key items needed. 
  • The size, complexity and scope of your organization, network (plants, distribution, suppliers, etc.), products, customers, processes, systems, data, etc.

Typically, these types of timeframes are achievable for a mid size SIOP rollout:

  • Assessment – 4-12 weeks depending scope and complexity
  • Design and rollout of a pilot SIOP process – 2-3 months
  • Rollout of the SIOP process – 6-12 months depending on several factors
  • Expansion & upgrades/ advancements to the SIOP process – 3-12 months depending on several factors
  • Create sustainability in the SIOP process – this can typically be completed on a parallel path with the expansion and upgrades 

Who can help us implement SIOP?

There are a few different ways to obtain help in implementing SIOP:

  • Internal Expert – Several clients have identified a SIOP leader internally to lead the process. This alternative typically requires a full-time position when assessing, designing, piloting, and rolling out SIOP. Thus, we find this solution more frequently in mid-to-large organizations with multiple plants and complex processes. 
  • Consultants – Many of our clients chose to hire outside help to assess, design, pilot, rollout, and/or create sustainability for SIOP processes. This can be critical if there is limited existing knowledge of how to successfully design and implement SIOP processes within the organization. Many clients also hire outside help to accelerate progress and supplement internal resources. Read LMA Consulting Group’s book SIOP: Creating Predictable Revenue & EBITDA Growth for why you might need SIOP and how to implement the process.

Where Do We Find Resources for Implementing SIOP?

To learn more about how to leverage SIOP in your organization, visit our SIOP resource webpage or purchase our book, SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth on Amazon, iTunes or a complimentary PDF on LMA Consulting. Sign up for a complimentary discussion on SIOP readiness, and/or contact us to be added to our distribution list.

SIOP Book