Cash is tied up in inventory. Customers still wait.
S&OP and inventory policy for regulated plants, built by people who have run one.
Inventory is at a record. So are backorders. Finance wants the cash back; operations says cut stock and service falls further. Both are looking at the same warehouse.
Signs it is already happening.
- Sales, operations and finance each bring their own number to the monthly meeting, and the meeting spends its time reconciling them
- Safety stocks were set once, years ago, and nobody can say why they are what they are
- Product sits in quality hold or awaiting release while the same item is expedited from a supplier
Where the cash hides.
Per 100 of inventory value in a regulated plant, illustrative. Stock that protects nothing sits in four places:
- Stock held against a forecast that is always high: bias, never corrected
- 10
- Safety stock set once and never revisited: protecting risks that moved
- 8
- Batches in QC hold or awaiting release, counted as available before they are
- 5
- Slow and obsolete, still counted as stock: the saving is in stopping the next batch
- 7
- Protecting nothing
- 30
Here 30 of every 100 protect nothing, and none of it is protecting the customer who is waiting. That stock is missing for a different reason: the plan changed after the meeting, and nobody re-planned. Your stock will split differently.
Three reasons the S&OP meeting doesn't fix it.
01 · It reviews, it doesn't decide
The numbers are presented; the trade-off between stock and service is deferred to “offline” and never closes.
Fix One demand-and-supply number agreed before the meeting, so the meeting decides.
02 · No weekly layer
The monthly plan is dead by the second week and the expediting starts.
Fix A weekly execution review that closes the gap between plan and reality inside the month.
03 · Release is not in the plan
Planning counts a batch as available the day it is made; QA release, certificate of conformance or serialisation clears it days later.
Fix Release lead time in the planning parameters, and the release queue visible on the same board as production. QA keeps the release decision.
How we move on it.
First month
One number
Demand, supply and inventory on one basis that finance accepts. A first pass on safety stocks against the risks that exist today.
First quarter
A meeting that decides
Decision log, owners, dates. A weekly review that catches the break before the expedite.
Two to four quarters
Stock and service move together
Inventory comes down where it was protecting nothing; buffers go where a supplier or a release queue can stop a shipment.
Questions we hear about this.
- Why not a large firm's planning practice?
- Because in a regulated plant the plan has to survive release times, validated capacity and shelf life, and that is where most S&OP designs break. Our people have run those plants. Tools come after the decisions, if they are needed at all.
- Will cutting inventory cut service?
- It does if you cut where the stock was protecting something. The point of the first month is to find the stock that protects nothing. In a regulated plant it sits in four places: forecast bias, safety stock set once and never revisited, batches in QC hold counted as available, and slow and obsolete items still counted as stock.
Tell us where the stock and the backorders meet.
Describe the inventory, the service you are missing and how the S&OP meeting runs today. In 15 minutes we'll say whether we have seen the pattern before, and what it would take to find the stock that protects nothing.
Nothing to prepare. If sharing material would help after the call, we sign an NDA first.
The senior person who would do the work gives you a straight answer. Our people →