SIOP: The Heartbeat of Success

August 22, 2023 | by Ed Hoffman

Is your company facing challenges with … 

• Obsolete inventory. 
• Meeting customer demand. 
• Supply chain issues. 
• Cash flow. 
• Overstocked inventory.  
• and more? 

 You are not alone.   

CBS Provides Timely, Proven Solutions 

While these circumstances can feel overwhelming, there is help available with proven and timely solutions. Our consultants at Competitive Business Solutions regularly assist managers in a variety of fields — from medical to manufacturing — find strategic solutions for success.  

And the good news is … we can help you. And, more importantly, in a timely manner. 

Recently, CBS met with a potential new client who produces more than $1 billion in roofing products and systems. This is an impressive number, but like any structure it is a solid foundation and strong framing that holds up the roof, and organizational termites were feasting here.   

During their annual strategic planning session, it became obvious to attain their projected 5-year growth strategy of $2 billion, serious issues had to be corrected. Immediate action was needed to change poor key performance indicators. 

Struggling with Poor Key Performance Indicators 

• Extremely high-working capital — 28% of sales. 
• Poor customer service — only 73% of products were arriving on time. 
• High scrap rates due to stock obsolescence — $29 million, annually. 
• In addition to underperforming in these key performance indicators, the company continually missed their cost budgets by 10 to 15%. 

 “We struggled for years to improve; we knew somewhere out there was a better way,” company management said. 

During their initial meeting, the CBS team focused on understanding the problem. What could be done to improve the roofing company’s lacking key performance indicators, to set them up to grow their business at a 35% compounded annual growth rate and reach a $2 billion goal? After a variety of interviews and a rapid assessment, our team proposed a way to untie the tangle of performance knots by implementing a robust SIOP (sometimes referred to as S&OP) — an acronym for Sales, Inventory and Operations Planning — a crucial process that was missing in their business. 

SIOP – Essential Element for Running a Successful Business 

An effective SIOP process, explains the website Supply Chain Game Changer, is an essential element for running a successful business. A SIOP process will allow you to improve your forecasting accuracy, capacity and resource planning, cash flow and inventory levels.   

Sales, Supply and Operations are the vital arteries of any company, and they must regularly and clearly communicate between each other to function well. While it seems like a basic concept, often the focus in each area is on their own arena and they are not aware of what is happening elsewhere.  

Time being of the essence, the client was concerned putting a SIOP in place could take a year or more before showing any results — 12 months they did not have. CBS assured the anxious client our proven, rapid SIOP implementation methodology could be up and running within a month or less. 

Kaizen Event Leads to Good Change 

First on the agenda was to set up a kaizen event for the company’s process owners and senior leadership. What is a kaizen event? It isn’t the name of a dish you will find at an Asian restaurant, although the roots of the concept are from Japan. According to SafetyCulture, a global technology company, the term in Japanese means “good change.” A kaizen event is a focused cross functional team with a tightly defined scope that typically yields specific function improvements. In this case, the kaizen event happened over a week, a relatively short time, but with projected long-term results … and good change. 

We understand time is money and CBS believes in quick improvements. CBS moved promptly to identify the communication gaps within the company and put a SIOP process in place during the kaizen week.

During the kaizen event, the group is trained on the process of a well-functioning SIOP process. Next, they clearly defined the main steps for each of the functions, what they needed for input data to complete those processes and, finally, what the output should be to meet expectations. After the crucial details were developed, the team gathered the data and began to generate the required outputs in support of conducting an executive SIOP meeting.

Everyone in Company Must Take Ownership of Being Involved 

Additionally, of major importance is a clear mandate from the executive office down of the importance of everyone in the company taking the time to implement a SIOP process and the scheduling of regular meetings to keep communication flowing — with a dry run of a SIOP meeting coordinated by CBS before week’s end. 

The continuing benefits of the SIOP process, according to Spend Matters, is companies have recognized that if they pay attention to organizational structure, tracking metrics, how the data is developed and used and combine that with top-down executive support, they harness the full benefits of the SIOP process. 

We agree — and this company’s first year results support the importance of the SIOP. Look at what positive changes happened. 

First-year Statistical Results Are a Win 

• Inventory reduction – inventory obsolescence went from $29 million to $13 million. 
• On-time delivery increased from 73% to 88%. 
• Working capital improved from 28% to 23%. 
• Direct cost savings from this process were $7.3 million. 
• Increased market share by 2.5 basis points. 

Our experienced team at CBS will help you find strategic solutions for success. Ready to get moving forward?  Click on this link, (https://cbsteam.com/about) and select the red ‘Get Started’ button. 

 #Competitive Business Solutions #CBS #SIOP #Sales, Inventory and Operations Planning #Kaizen 

Resources: 

Supply Chain Game Changer 

Supplychaingamechanger.com 

https://supplychaingamechanger.com/siop-why-is-it-important/ 

SafetyCulture 

Safetyculture.com 

https://safetyculture.com/topics/kaizen-continuous-improvement/#History%20and%20Developments 

Spend Matters 

Spendmatters.com 

https://spendmatters.com/2016/10/11/know-company-needs-implement-siop-dont/