Executive interest in transforming their supply chain has increased to heightened levels. The pandemic highlighted the risks in the end-to-end supply chains. The wars and conflicts popping up around the globe (Russia-Ukraine, the Middle East war, China/ Taiwan tensions) added fuel to the geopolitical risk fire. Other supply chain risks such as the ship stuck in the Suez Canal, the Baltimore Bridge collapse, Hurricane Helene’s devastating impact including on IV fluids availability, and the Salt Typhoon (cyber attacks on infrastructure) emphasize the importance in taking control of your supply chain.

On the regulatory and financial fronts, there are substantial requirements and inflationary pressures to tackle, driving pressure on cost reduction, productivity improvements, sustainability combined with innovation, automation, ERP optimization, and the use of advanced technologies. And/or, they must improve their revenue predictability and projection of operational capabilities to achieve a superior customer experience and attain revenue growth goals especially in rapidly growing industries. The bottom line is that it is a tricky situation to navigate. The best companies have realized they must transform their supply chain and are pursuing an upgrade to their SIOP (Sales Inventory Operations Planning) processes and business systems (also referred to as S&OE, sales and operations execution) simultaneously.

Case Study: Drone Manufacturer

A drone manufacturer wanted to achieve revenue growth goals while ensuring strict attention to financial targets and taking minimal to no risk in producing ahead on their engineer-to-order (ETO) product line. In essence, this kept the status quo intact; however, it was not good enough. In addition, they wanted to meet aggressive growth goals and drive cost improvements with down-the-line supply chain partners. They had a high-quality, Cal Tech-like workforce and strong yet separate ERP, quoting, and financial analysis systems. A supply chain transformation was in order, and they chose to pursue a SIOP upgrade as a vehicle to drive the appropriate improvements in their culture and business systems process improvements.

Assessment & Recommendations

We kicked off the process with a SIOP workshop for the leadership team to gain insights, inputs, and ideas to transform their supply chain in a way that would achieve the objectives while educating the team on the key elements and benefits of a SIOP process. After this interactive and intensive workshop, the team walked away with alignment on the desired outcomes from the SIOP process, a few of the key bottlenecks to be addressed, and energized on the potential for SIOP to drive the appropriate supply chain transformations.

Next, our client brought all the experts together inclusive of Sales Quoting, Customer Service/ Order Fulfillment, Planning, Procurement, I.T. and Data Analysis, and other related resources as needed such as Operations, Engineering, Sales, etc. We jumped in and completed a deep dive assessment of the core processes and systems associated with the critical issue. This issue included the following:

  • Forward view of demand with ETO: How to get an idea of the demand plan (sales forecast) in advance without adding risk as Finance did not want to dedicate funds to purchase and produce in advance for orders that did not have a final bill of material (BOM) and final due date from the customer. The engineering timeframe could be several weeks / months and customers changed their requested due dates frequently.
  • Gaining alignment: How to gain alignment that if we could find a way to get in front of customer requirements and translate into supplier forecasts and operational plans without adding risk, it would make sense to pursue. This philosophy would transform their processes in quoting, order backlog management, planning, purchasing, operations, and ties to finance. Thus, they would not gain alignment unless all executives agreed to take the leap.

Pilot SIOP Process & Transformed the Supply Chain

We found the needle in the haystack and were able to prove out that a key product grouping might be a good candidate for a pilot program. The product grouping had enough layers/ subsystems in common (also might be referred to as configuration elements of a configure-to-order (CTO) product) with stable demand such that if we could group the forecast for this group of products together, we could reduce the risk vs the current state (dependent on frequent changing order backlog). Of course, that was the “easy” part as we had to design the SIOP pilot including how the process would interact with the quoting, order, and financial system information, how we would translate the product group forecast into production and purchase plans without committing too far into the future, and how we would gain alignment with a skeptical group of executives.

Thus, we rolled up our sleeves and partnered with the client’s core team to design and test the end-to-end process in conjunction with the quoting, ERP system, and financial analysis systems (none of which talked with each other). We collaboratively developed and rolled out the appropriate business systems upgrades to support the SIOP pilot process. Simultaneously, we developed analyses, metrics, slide decks, and agendas to support the monthly SIOP cadence and met with key leaders and influencers in the organization to bring them up-to-speed, gain their feedback and input, and address their concerns. For example, we made a slight change to the typical SIOP cadence to call out a separate inventory meeting.

SIOP Results

Finally, we rolled out the SIOP cycle with a demand meeting, supply meeting, inventory meeting, and executive meeting. We successfully gained alignment with the executives to transform their typical process, use of systems, and check-ins with Finance in support of the newly designed one. It signaled a change in culture and enabled a supply chain transformation. Fast-forward a year, and they could provide supply chain partners with forecasts without risk-laden commitments, which resulted in Kanban-style replenishments, resulting in reduced inventory, increased margins, and satisfied customers. Internal resources did not have to chase dates on an hourly or daily basis and instead could focus on forward-thinking strategies, innovating, and leveling up performance.

SIOP: The Path Forward

SIOP is not a quick fix; instead, it is a collaborative, forward-thinking, and strategic process to align demand with supply and Sales with Operations to transform your supply chain and drive business results. Although it is simply an upgrade of your most critical business processes and systems to orchestrate successful revenue growth and profitability, SIOP fuels this type of transformation and provides a vehicle and collaborative concept to bring results to fruition. Instead of arguing about process change, SIOP provides a forward-looking process to surface potential bottlenecks, mitigate risks, pivot strategies, and take advantage of opportunities as part of the regular monthly cadence, leveraging team dynamics for maximum results. To learn more about how to rollout SIOP, download a complimentary copy of our book, “SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth“.

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Using SIOP to Drive Revenue, Margin, & Working Capital Predictability & Improvement