SIOP (Sales Inventory Operations Planning)

• SIOP (Sales Inventory Operations Planning)

• SIOP is a crucial business process that aids with the organization’s strategic
plan. SIOP gives profitable updated sales information, new product
development plans and production and inventory updates to the organization.
It also helps the business oversee profitability strategies and replenishment.
 
• Objective of SIOP
• Reduce client lead times
• Allocation planning
• Inventory management
• Cost reduction
• optimization of stock levels
• Improvement of service levels and synchronizes materials.
• This helps establish and enhance customer satisfaction and service levels that
enables the industry to meet financial goals.
SiOP = Sales inventory & Operations Planning
Process of shaking hands over future supply and demand positions.
In essence, the process asks:
1. “What is the demand?” – Forecasts, market intelligence, etc.
2. “Can it be met?” – Internal and external capacity modeling

3. “If not, what actions need to be taken?” – Contingency planning

4. “How are the inputs/outputs measuring up?” – Process

Measurements:

Forecast accuracy, both “OEM and Aftermarket parts”

Delivery performance, both internal and external

Past due, inventory, etc.
OEM AND AM
• OEM Parts: OEM is an abbreviation for Original Equipment Manufacturer.
It means the parts are made directly by the car manufacturer, not by a
third party.
• OEM parts, because they’re made by the manufacturer to fit the
specifications of a particular make and model, tend to fit perfectly.
However, the also cost more money as a result.

• After Market Parts: Aftermarket parts are manufactured by a company

other than your car manufacturer. They can be produced at a high volume
and made to fit the specifications of different types of vehicles, not just a
single car make and model. They are similar to OEM parts in like, kind, and
quality, but they may not be a perfect fit because they are made by a third
party. As you can imagine, they are often also much cheaper.
SiOP Planning Cycle
1. Pre-SiOP Demand
• OEM and AM forecast and market intelligence
2. Demand Approval
• Review the first draft of demand
3. Pre-SiOP Fulfillment
• Division and plant review of capacity and manpower to meet
the demand
4. Integration Meeting
• Team reviews demand, supply, and inventory plans and
discusses issues
5. Executive Review
• Metrics and process review
Production
• Vehicles are produced at the final assembly plant from the parts provided by
hundreds of suppliers.
• The plant is subdivided into shops. The vehicle is born in the body shop where the
frame and body are formed.
• The body parts are stamped in the stamping shop by presses.
The body shop is where numerous robots are used to weld the body parts together.

 After body being assembled, it moves to paint shop

 After painting ,it moves to final line where supplier parts are installed to make
finished vehicle.
•Final Inspection is done and moved to yard .
 Production Planning and Types of Inventories

Employing the generic definition of inventory, a large spectrum of situations can be

structured as inventory management problems. These include the following:

(a) Raw materials inventory as input to manufacturing system.

(b) Bought-out-parts (BOP) inventory which directly go to the assembly of product
as it is.
(c) Work-in-progress (WIP) or Work-in-process inventory or pipeline inventory.
(d) Finished goods inventory for supporting the distribution to the customers.
(e) Maintenance, repair, and operating (MRO) supplies. These include spare parts,
indirect materials, and all other sundry items required for production/service
systems.
Inbound Logistics :
Company establish partnership with third party logistic providers Company
organizes many of its suppliers into clusters based on geographic location.

Parts are picked up from those suppliers by trucks and delivered to regional
cross dock.

At cross dock, parts are unloaded and staged for each assembly plant and then
loaded to trucks which take parts directly to each plant.
After the parts are unloaded, the truck is reloaded with the corresponding
empty returnable containers.

Returnable containers flow in reverse route

Outbound logistics refers to the same for goods going out of
a business. 
PRODUCTION PLANNING

• Master production schedule—MPS is a planning tool that exists as a layer between

your MRP system and your demand (forecasting system and actual demand). MPS
is used to balance demand with capacity by moving production from periods with
inadequate capacity into periods with available capacity.
• A bill of materials (BoM) is a list of the parts or components that are required to
build a product. At its most complex, a BoM is a multi-level document that
provides build data for multiple sub-assemblies, which are essentially products
within products.
• MRP generation—describes the process where MRP uses the bill-of-material
structure and other inventory data to calculate gross and net requirements, and
create planned orders.
• MRP explosion—describes the process where MRP expands demand through the
bill-of materials structure and offsets it by the lead time. The MRP explosion is
part of the MRP generation process.
PRODUCTION PLANNING

MRP—Material requirements planning (MRP) or Manufacturing resource planning

(MRPII).
MRP was originally designed for materials planning only, and involved exploding demand
through a bill-of-materials structure, calculating gross requirements and net
requirements and creating planned orders.

Today, the definition of MRPII is generally associated with MRP systems (when someone
refers to a system as an MRP system, they are probably talking about an MRPII system).

MRPII is the consolidation of material requirements planning (MRP), Capacity

requirements planning (CRP), and master production scheduling (MPS).

MRPII = MRP+CRP+MPS
MRP - Material requirements planning (MRP)
CRP - Capacity requirements planning (CRP)
MPS - Master production scheduling (MPS).
Production Planning and Scheduling
WHY HAVE INVENTORIES ?
Time lag between placing orders and getting supplies at the point of consumption whenever we place
a replenishment order, there is a time lag between placing the order and getting the materials at the
point of use. This is called Replenishment lead time.
Variability of lead times – In most cases, particularly in Indian supply environment,
there is some degree of variability in lead times because the supply environment is perhaps “just-in-
case” (JIC) type. Inventory has to be maintained as a shield to cope with the supply uncertainty.
Demand variability – If either we are unable to estimate the demand correctly or
if there are uncertainties in demand, additional inventory will be required to act
as a shield to absorb the demand variability.
Seasonal inventory – If the demand is cyclic or seasonal, then sometimes building inventory in the lean
period to meet the peak period demand is employed as a strategy in aggregate production planning.
This strategy results in inventory in some part of the year.
Pipeline inventory – This is the inventory due to the distribution of a product or a
commodity over long distances, so that the “goods in transit” become substantially important. This
constitutes the pipeline inventory. In the context of production processes, this is called in-process
inventory or work in progress (WIP) which is also inventory in terms of idle resource blocked in the
nonproductive form.
Other factors – Sometimes inventory is maintained to take care of other situational parameters such as
inflationary pressures, shortage of materials in the markets, and quantity discounts to encourage bulk
purchasing or simply the desire to spend the budget allocated for materials before the end of the
financial year resulting in large and at times unnecessary purchases which eventually become dead
stock.
SiOP Planning Cycle
1. Pre-SiOP Demand
OEM and AM forecast and market intelligence
2. Demand Approval
Review the first draft of demand
3. Pre-SiOP Fulfillment
Division and plant review of capacity and manpower to meet
the demand
4. Integration Meeting
Team reviews demand, supply, and inventory plans and
discusses issues
5. Executive Review
Metrics and process review
Software Tool Expectation

• Forecast - View & export up to one year of forecast (configurable buckets)

• PO Inquiry - View the status and detail of all PO’s
• Inventory – On-hand inventory, in-transit inventory, and min-max status
• Schedules – View all detail for firm and planned releases
• ASN shipments and monitor open orders.
• Advanced shipment notification
• —advanced shipment notifications (ASNs) are used to notify a customer of a
shipment. ASNs will often include PO numbers, SKU numbers, lot numbers,
quantity, pallet or container number, carton number. ASNs may be paper-based,
however, electronic notification is preferred. Advanced shipment notification
systems are usually combined with bar-coded compliance labeling which allows
the customer to receive the shipment into inventory through the use of bar-code
scanners and automated data collection systems.
Presently Used Tools in our Organization

JDA
JDA Software Group, Inc. is an American software and consultancy company (owned
by New Mountain Capital), providing supply chain management, manufacturing planning,
retail planning, store operations and collaborative category management solutions
headquartered in Scottsdale, Arizona. The company has more than 4,000 companies as
customers in the manufacturing, distribution, transportation, retail and services
industries.
JDE
J.D. Edwards World Solution Company or JD Edwards, abbreviated JDE, was an Enterprise
Resource Planning (ERP) software company. Products included World
for IBM AS/400 minicomputers (the users using a computer terminal or terminal
emulator)
KRONOS (AS/400) , BIRST , PEOPLE
We are using it for Resource Management.

BI Tools for Forecasting

Informatica , Pentaho, Altryx, Jitterbit etc.
Forecasting

• Forecasting is a method used to predict and place all information mainly in design and
operating systems. They both estimate what that information will look like in the future. In
order to do so, one must determine the purpose, establish a time horizon, select a
forecasting technique, make it, and then monitor the new forecast. The methods used to
decrease error include:
• Delphi method, naive method, and weighted average method.

• A major issue in forecasting is seasonal variations because it has a repeating movement. This
is where the control chart becomes important mainly because it monitors forecasting errors. 
Three main approaches of Forecasting

• Judgmental Forecasts: Useful when forecasts must by done in a short period of time,

when data is out dated, unavailable, or there's limited time to collect it.
• Time Series Forecasts: Most Common, are used to identify specific patterns in data and use
them to project future forecasts
• Associative models: identify related variables in order to predict necessary forecasts.
SIOP Demand Planning and Forecasting Software

Demand planning software allows organizations to minimize waste by tracking trends that
will affect future demand.

This type of system accomplishes the task by improving forecasting governance in order to
eliminate errors or biases in the data and also by reducing data latency, which makes
real-time demand planning possible.

In addition to procurement software and strategic sourcing software, demand planning

systems are an important, cost-cutting element of supply chain management software.

Common Features of Demand Planning and Forecasting Software ( Next Page)

 Cross-functional or multi-dimensional forecasting
processes analyze the historical demand for an individual
Historical analysis product along with broader macro- and micro-economic
trends to deliver an accurate forecast to supply chain
executives.

The software gathers a wide range of data to improve past

and future demand analysis. Filtering and separation
Data separation
occurs by product, customer, season and market
information.
The software factors in scheduling data related to
promotions, advertising, planned product launches and
upcoming competitor activity, accumulating and displaying
Demand shaping capacity
detailed plans for future marketing campaigns as well as
the projected effects on awareness, demand and revenue
that will accompany them.
With all the information in the system, the software can
perform a series of scenarios and simulations based on
“what-if” factors. Based on the results of these what-if
“What-if” analysis
simulations, potential deviations from planned demand
can be communicated to the necessary areas of the supply
chain in order to adjust shipments or production.
Demand planning systems communicates with other
elements of the SCM system to renegotiate replenishment
Supply chain communication scheduling through capacity planning. This prevents
unnecessary oversupply and cost inefficiencies by reducing
inventory carrying costs and excess inventory write-offs.
Inventory

The value of materials and goods held by an organization to support production (raw
material, sub assemblies, work in process for support activities(repair, maintenance,
consumables)or for sale or customer service (merchandise , finished goods, spare
parts)
A itemized catalog or list of tangible goods or property or the intangible attributes
or qualities.
• Common inventory management techniques
• Just in time
• The Just In Time (JIT) method works to lessen the volume of inventory that a business has on
hand. It is considered a risky technique because you only purchase inventory a few days
before it is needed for distribution or sale so that the items arrive just in time for use.
• JIT helps organizations save on inventory holding costs by keeping stock levels low, and
eliminates situations where deadstock sit on shelves for months on end. You need to conduct
thorough research into customer buying habits, seasonal demand, and source for reliable
suppliers and channels of transportation before implementing JIT into your business
operations to minimize risks and screw ups.
• ABC analysis
• Based on the Pareto Principle (also known as the 80-20 rule stating that 80% of the overall
consumption value is based on only 20% of the total items), ABC analysis is a popular
technique for dividing on-hand inventory into three categories: A, B, and C, based on annual
consumption unit, inventory value, and cost significance.
• A: Items of high value (70%) and small in number (10%)
• B: Items of moderate value (20%) and moderate in number (20%)
• C: Items of small value (10%) and large in number (70%)
• *the values and number of items of each category are expressed as a percentage of the total
• The trick is to manage each category separately and as required, as not every category needs
the same amount of attention and effort. ABC Analysis allows for the prioritization in terms of
managing different goods and inventory, where selective control and allocation of funds and
human resources is deployed.
• For instance, A Items should be eyeballed constantly and put under special and tight
inventory control because the need for reordering will be more frequent and continuous. On
the other hand, items in Category C require minimum attention and can be kept under simple
observation, employing a rather hands-off approach.

• Dropshipping
• This inventory management technique eliminates the cost of holding inventory altogether.
When you have a dropshipping agreement, you can directly transfer customer orders and
shipment details to your manufacturer or wholesaler, who then ships the goods directly to
your customers. Thus you do not have to keep goods in stock, get to save on upfront
inventory costs, and benefit from a positive cash flow cycle.

• Cross-docking
• A technique similar to dropshipping where both methods rule out the need for warehouses
or labor costs and risks involved with inventory handling, cross-docking is a practice where
incoming semi-trailer trucks or railroad cars unload materials directly onto outbound trucks,
trailers, or rail cars with little or no storage in between.
• Essentially, it means you move goods from one transport vehicle directly onto another with
minimal or no warehousing. You might need staging areas where inbound items are sorted
and stored until the outbound shipment is complete and ready to ship though. Also, you will
require an extensive fleet and network of transport vehicles for cross-docking to work.
Basic Terms

Cycle stock results from the need to produce or order in batches. The lean philosophy works
towards a 1-piece flow. As long as we’re not there and are confronted with significant
changeover or ordering cost, the EOQ principle teaches us it’s more economical to produce
in batches. If we produce once a month, the average cycle stock will be 2 weeks. If we
produce once a week, the average cycle stock will be half a week. The EOQ shows us that
optimal batch sizes go up when we are confronted with higher change-over/order costs or
when the product cost goes down. They are primary drivers of the amount of cycle stock.

Safety stock is a buffer against uncertainty. It will typically look at the forecast error, the
average lead time and the variance on that lead time. More advanced variants will look at
factors like yield or quality loss. A second element in the safety stock is the service level. The
service levels are typically converted into a k- or z-factor that defines how many times we
will cover for the uncertainty. They are 2 separate things. We can have a product with low
uncertainty but require a very high service level. We can have products with a high
uncertainty but accept a low service level, for instance if there are multiple substitutes
available.
 
• Anticipation stock is typically the result from your supply planning process. I may
build up stock to anticipate a seasonal peak, a tender or a shutdown. This type of
planning decisions leads to so-called anticipation stock.
 
• As long as we have lead times we will have inventory sitting on the production
floor or sitting on trucks, trains or boats. We call this the work-in-process or transit
stock. Improving flow in production can reduce the work-in-process. Optimizing
transport routes can reduce the stock in transit.
 
• Strategic stock is carried to manage potential risks, e.g. an expected price increase
or a shortage in a key raw material. As opposed to a plant shutdown these events
are not sure. That makes the difference between anticipation and strategic stock.
You can consider strategic stock more as a hedging and part of risk management in
the supply chain.
Increased demand for third party integrations. Rather than having to purchase an
entirely new system that covers every aspect of business operations, many buyers now
seek solutions that allow them to easily import data, such as procurement, sales and
operations, from their pre-existing software into the new solution without requiring
extra manual effort.

Analytics. 
Demand planning and forecasting software vendors use different predictive models to
improve the accuracy of demand forecasts. As a result, business intelligence software
vendors with predictive analytics capabilities have started offering demand planning
and forecasting software for supply chain application.

For example, Qlik and Board BI have expanded their product offerings for the demand
planning software market.
Market Trends to Understand

Software as a service (SaaS). 

Many businesses are now opting for cloud-based systems that are hosted by the
vendor and enable users to run the software entirely via web browser. Vendors that
provide cloud-based demand planning and forecasting software include Fishbowl, SAP,
S2K and Infor.
Digital monitoring. 
With the increasing globalization of the supply chain, companies face challenges such
as delays, longer delivery times, degraded quality and higher costs. To tackle these
challenges and maintain visibility and connectivity across the entire supply chain, many
demand planning and forecasting software solutions offer a digital monitoring feature
that provides real-time updates.
Artificial intelligence. 
The supply chain for global companies is complex and constantly evolving, which means
it is susceptible to errors that can cost millions, if not billions of dollars. To combat this,
some vendors are introducing features that are capable of finding and correcting both
historic and live supply chain data.
For example, vendor Rulex introduced an AI software solution in September 2016 that
can automatically detect and correct errors in supply chain data.
Trending SIOP Tools in Market.

• https://www.softwareadvice.com/scm/demand-planning-software-compa
rison/