Orchestrating for Success: Sales Inventory & Operations Planning (SI&OP)
Creating the proper alignment and balance between demand and supply is not easy.
Alignment requires a clear, focused process that manages sales/marketing and operational issues in a thorough and efficient manner. How do you bring together sales/marketing, operations, finance, and product management to facilitate joint objectives of the overall enterprise? The answer: an effective Sales Inventory and Operations Planning (SI&OP) process.
Non-alignment adversely impacts performance
If SI&OP activities are not aligned and integrated, small problems quickly escalate into major challenges, which adversely impact corporate performance. As each part of an organization jockeys to satisfy its own priorities, valuable time and resources are wasted, ultimately leading to poor customer service.
The consequences of poor SI&OP are substantial: late orders to customers, excess inventories, short orders, overtime, inter-plant transfers, expediting, and poor resource utilization. These issues impact the bottom line, while fostering a reactive culture of undisciplined business processes.
SI&OP: Key to enabling Clean Orders
What is SI&OP?
- A monthly formal balancing of supply and demand through a three- to 18-month planning horizon by aggregate product families.
- Includes incoming orders (bookings), backlog, shipments, forecast, finished goods, inventory, production and capacity projections in monthly time buckets.
- Provides a view through a proverbial “crystal ball” to a comprehensive actionable plan to guide/predict a company’s future.
- Takes into account product design, raw materials, finished goods, manufacturing capacity, labor, finance, logistics, marketing, sales and customer service.
SI&OP is really a series of processes that should be implemented in phases. It provides the catalyst for a detailed review of product, demand and supply before combining it all under a monthly comprehensive management business review.
A well-run SI&OP process is key to enabling Clean Orders. A frequent downfall occurs when companies try to treat their SI&OP plan in the same way as their operational/manufacturing plan (which typically is present – 3 months). By doing this, they get caught up in near-term, tactical planning and completely miss the value associated with longer range, strategic planning.
Having an effective SI&OP process has become more important than ever! See the value of SI&OP leadership by reading a case study, which shows how it can improve forecast accuracy, and the types of results that can be achieved. The next article in this series will begin discussing how you can create a roadmap to SI&OP success.