From the diary of a Supply Chain Consultant
by: I.Pilkington & B.Perez
We often get asked, is it S&OP or SIOP? What should we call the process? This question has generated many heated debates in companies! We have specially seen this in companies where the process in general is not completely understood and where S&OP or SIOP deployment is the objective itself and not a means to an end.
The truth is you can call it any name you want, as long as the process delivers the benefits: S&OP (Sales & Operations Planning), SIOP (Sales, Inventory and Operations Planning) and the more evolved mature version of the process known as IBP (Integrated Business Planning).
S&OP is a process that focuses on balancing a company’s supply with demand. It’s a highly collaborative process where functional departments such as sales, operations, supply chain, and finance to name a few, get together to create one single business plan. The broader goal of S&OP is basically to align daily operations with business strategy. Because S&OP aligns all levels of operations from tactical to strategic, if a company is focused on Inventory management or performance they might include the “I” for Inventory as the key deliverable.
In reality because S&OP focuses on aligning resources to demand, inventory is a major focus of S&OP, it’s a major deliverable of the process and executing the process right will deliver at least a 30% improvement on inventory performance.
The reason right size inventory is so ingrained in S&OP is because in essence you are creating a plan to match the supply of materials and resources for that specific demand mix. Tools such as ABC classification, to determine the value of inventory items based on their importance to the business, and PFEP (plan for every part) which is a visual management tool that allows decision making on material flow and inventory levels to all stakeholders across the organization. When these tools are aligned with the ERP system, production planning and material management will systematically drive the fundamental cogs in the wheel of supply chain.
An experience we had while working with a company that had a very negative experience with S&OP deployment in their past was that every time we mentioned this process as a potential solution to their : delivery, inventory and growth challenges they refused the idea. To overcome this negative reaction, we engaged the team in understanding the process and substance behind it and let them called it a name that engaged people their people.
Our approach is to coach clients in to not to worry about what the process is called. Our suggestions is to focus on a successful S&OP process implementation and more importantly, the execution and sustainability of a process that will deliver results.
The clients we have worked with have experienced the following proven results: 20% growth, Inventory reduction/optimisation by 30%, 20% improvement in productivity, and significant improvement on service levels and customer satisfaction.
As William Shakespeare wrote: “what’s in a name? That which we call a rose by any other name would smell as sweet”. With results such as these, what does it matter how you call the process? Let’s focus on the substance behind the name, rather than the name itself.
S&OP is a social process with simple steps, and these steps never change. What is important is how these steps - Data analysis, Demand, Supply, Consolidation and Executive review – are adapted to your business and to your strategic targets. From strategic to tactical S&OP is the means to an end not just the target to cross off your project list.
In summary focus on the substance, call it something that will engage your team and enjoy the benefits.
Hope you found this blog useful for your S&OP journey. Enjoy,like,comment.
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