Siop process for facilities

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Welcome to our snop ask the expert series Doug today's question is why don't you call snop siop you are clearly not putting the focus on the one thing we are really trying to manage in the process inventory wow okay so this is uh what should we call the process and it's uh I I know I've gotten in some great discussions about this is it scop is it snop is it ibp um and I do fall on the side of saying it really should be sales and operations planning and I'll give you a few reasons for that but I will cave at all that by saying it really in many ways doesn't matter to me if you want to call it scop or snop but I do think scop actually understates what you should be getting out of your snop process and there's really two reasons for this and I'll start with the one which is a little bit longer and then I'll jump into the second afterwards which is quite a short reason so the first one to me is just because I don't put I in the name does not mean that it's not important in fact I do think the inventory plan is an important thing it's an important output of the process and because it is the one of the buffers that we use between our demand and our supply right we use that inventory to supply at less than lead time however it's really only one of the buffers we have inventory we actually have lead time as a buffer and we have something that is called upside Flex as a buffer all three of those are decisions out of the snop process and so yeah it's uh by putting it into the name we're kind of raising above these other buffers um I mean we could actually include them all but I think it would be uh let me see here it would be uh s i uh TF o p is kind of a long acronym pretty tough to kind of get through so yeah that's part of the reason I don't I don't think I would put inventory in that well if you're not quite sure though about these other buffers let me just give me a second I'll kind of explain that SN o is about balancing demand and Supply right the S and the O which is uh sales and operations demand and supply and it's about how do we improve the predictability of both of those and then really how do we make decisions around the buffers that we need to manage that uncertainty the risk um and really how do we uh um how do we manage the uh volatility in the imbalances and so like I said there's those three buffers so first is inventory which kind of talked about you most people understand in a make to stock environment that is just the straight finished goods inventory we have in our plant the second one to think about there is lead time and I want you to be thinking about that like lead time to the customer how long between when the customer places an order um do you ship the order right and this lead time is actually a pretty powerful buffer or tool that you can use as part of snop the customer expected lead time is really what is kind of set from the market standpoint and it is going to be somewhat related to what your competitors are doing and so you want to understand that customer expected lead time um and you want to understand that relative to what your supply chain lead time is and so you can extend lead times to accommodate for what your supply chain lead times are or in some cases you can say I want to reduce lead time and so I've got to figure out some buffering that I might do in order to reduce that lead time what's important to understand with that decision and how you man manage lead time is as you extend lead times out you want to make sure you're applying promis states to orders that align with that lead time because you're going to maintain your service levels even though you're extending the lead time and that's a decision that's part of the snop process a buffer that you can use the other buffer is this idea of upside flex and simply put that's this idea of purposely planning for unused capacity and a supply chain component to allow you to flex up to manage demand that comes in in less than lead time and really this is a purposeful decision on how you do that and it's going to be within that snop Frozen Zone and you want to know what you can do and how long you can do it for and without really causing all kinds of undue disruption uh to the organization so it's really about managing those buffers and by the way there's more than one not just inventory the second reason that I use snop versus scop is I think scop actually ignores the most important word in snop which is the word and sales and operations I've already said it balancing demand and Supply it's really about getting sales and operations together assigning uh the ownership the right accountability and responsibility for putting together the demand plans and the supply plans right and holding the the each side accountable for the accuracy of those plans uh so that you're putting together a balanced plan and then figuring out how do we manage the imbalances back to the buffers so it is that and word that's really the most important part of that to bring the sales and the operations together I've seen organizations who focus on scop where the I becomes the ownership of the operations uh in the organization and sales is very passive in the process that's not just because it's the way it's called but it's one of the things one of the dangers that I've seen as you go uh through this uh through the process so those are my two main reasons one I is only one of the buffers want to also think about upside flex and uh lead time and the second reason is scop ignores the most important word in snop which is the word an the end of the day it's tomato tomato potato potato process process it's kind of that it's all the same thing hopefully this has helped you think a little bit more about what really is part of the snop process thanks and hopefully this was a good answer for [Music] you