Sales, Inventory, and Operations Planning (SIOP) — Definition + Examples

What is Sales, Inventory, and Operations Planning (SIOP)?

Sales, Inventory, and Operations Planning (SIOP) is a strategic business process that combines areas of the organization to align objectives. Their combined activities improve the overall business strategy. These areas include sales, inventory management, and operations to apply the company’s procurement strategy.

The term SIOP usually connects with the supply chain and manufacturing. However, certain circumstances apply to the optimization of the procurement process. SIOP in procurement requires coordinating sales activities and inventory management and integrating them with procurement planning.

How SIOP Works in Procurement

SIOP in procurement connects key business functions so teams can plan resources better and improve supply chain efficiency. It supports collaboration between procurement and operations by aligning demand forecasts with inventory and sourcing plans. This makes planning clearer and reduces mismatches between what is needed and what is bought.

The process starts with forecast data that procurement uses to set purchasing and inventory strategies. Operations then checks if these plans can be executed through production capacity and coordination. By keeping both sides synchronized, procurement decisions support organizational goals and customer satisfaction.

What are the Components of SIOP?

For Procurement, SIOP requires a smooth combination and communication of specific-area activities to function efficiently. Below are five parts that make it work in procurement.

1. Sales Planning

It starts with forecasting future demand for products or services. Sales planning and its accuracy are essential for the procurement teams to plan and adjust their purchasing activities. In this way, the organization can efficiently meet customer demands without overspending.

2. Inventory Management

It helps in determining the optimal maintenance level of the organization’s resources. Inventory Management requires an effective balance of holding costs and stockout costs. In short, the process ensures the flow of resources and operations smoothly without over or under-executing anything.

3. Operations Planning

It aligns the activities of the procurement team with the overall company operations. It synchronizes the team’s activities with the production schedules. This process smoothens the flow of materials, ensuring they are readily available. Moreover, it reduces the production delay and makes the supply chain more efficient.

4. Collaboration

It also promotes effective collaboration and cooperation among the various company departments. Meetings, huddles, and other discussions allow them to discuss crucial data, provide assessments, and take note of potential challenges. Doing so enables them to make an informed decision that can help give direction to the company.

5. Key Performance Indicators

Establishing key performance indicators or KPIs can help monitor the performance of each area. This component helps assess the effectiveness of the process in general. Having KPIs can help ensure continuous improvement and adaptability, especially with Procurement’s fast-paced environment.

4 Steps to Set Up SIOP in Procurement

SIOP in procurement creates a structured way to align demand, inventory, and operational capacity with purchasing decisions. It improves coordination across teams so sourcing plans are realistic, measurable, and easier to execute.

1. Establish cross-functional communication

Start by connecting Sales, Procurement, Operations, and Logistics through clear communication channels. Each team should understand its role and how it impacts the others. Define decision owners and assign responsibility for data and outcomes.

2. Run regular SIOP meetings

Hold recurring meetings to review the demand forecast, inventory position, capacity, and supply risks. Use these sessions to align assumptions and agree on one unified plan. Standardize how updates are shared and how decisions are documented.

3. Implement the right tools and analytics

Use tools that support data assessment, demand monitoring, and market trend analysis. Let procurement translate insights into sourcing and inventory strategies, while operations validates feasibility and execution. This improves plan stability and reduces surprises.

4. Set KPIs and continuous improvement

Define KPIs that track forecast accuracy, inventory health, service levels, and supplier performance. Review results consistently and use them to adjust the process and close gaps. Strong data, enabling technology, and steady communication keep SIOP improving over time.

Real-Life Example: ChemPoint 

ChemPoint operates a complex, global supply chain across a broad product portfolio and diverse customer segments. This created a recurring inventory risk: having too much, too little, or the wrong inventory at the wrong time. They needed to lower inventory exposure without hurting customer service.

ChemPoint strengthened its SIOP by using Logility to support the planning cycle and connect sales, inventory, and operations decisions. The setup enabled planners to manage by exception, so they could focus attention on the highest-risk gaps (potential stockouts, excess, or misaligned supply) instead of manually reviewing everything. The process also increased collaboration across marketing, sales, operations, and finance so the organization could run a consolidated plan instead of disconnected functional plans. This reduced planning noise and helped mitigate inventory and service risk through aligned decisions.

After working with Logility to support SIOP, ChemPoint reduced safety stock by up to 25%. At the same time, service levels remained above 96%, showing they cut inventory without sacrificing customer performance. They also reported stronger cross-functional collaboration that supported a more consistent, consolidated business plan.

What are the Advantages and Disadvantages of SIOP?

SIOP implementation depends on factors like company culture, commitment, and operational constraints. Organizations should assess their current situation to plan the rollout and get the best results. Below are three advantages and three disadvantages of SIOP in procurement.

The 5 Key Differences Between SIOP and SO&P

SIOP  and S&OP are closely related planning frameworks, and many companies use the terms interchangeably. The key distinction is that SIOP makes inventory a more explicit planning focus, so the process is often structured around stronger inventory decisions and trade-offs.

My Insights on Planning of Procurement

For this article, I shared my insights and perspective on planning of procurement:

Conclusion

SIOP is a strategic process that aligns sales demand, inventory targets, and operational capacity into one coordinated plan that supports procurement decisions. In procurement, it reduces the gap between what the market needs and what the company buys by connecting forecasting with sourcing and inventory planning. This improves supply chain efficiency and helps the organization meet customer demand with better cost control.

SIOP works through five core components: sales planning, inventory management, operations planning, collaboration, and KPIs that track performance and drive improvement. Implementation typically starts with cross-functional communication, regular SIOP meetings, and the use of tools and analytics to support decision-making. Real cases like ChemPoint show that SIOP can reduce inventory risk while maintaining high service levels, but it also requires strong data quality and commitment to change to work well.