Monthly Archives: November 2011

Everyone owns the forecast

Forecasting and demand planning are key practices in an effective supply chain. But I’m often surprised at how the various teams that are responsible for managing the forecasting process and results see accurate forecasting as someone else’s responsibility. In some cases forecast data is not even shared. And in these cases any success in accurately forecasting demand or consumption is due more to luck than skill.

So everyone needs to own the forecast. And not just the final numbers. Every person who uses the forecast needs to own the forecast, that is, they need to know that they are responsible for letting everyone else in the supply chain know what they know about factors that will impact the forecast. If product won’t be available for two weeks or will be restricted due to raw material issues, everyone who depends on the forecast needs to know this. Hiding these factors only undermines the validity of the forecast. And if people don’t trust forecast data, they won’t use it, and then it loses most if not all of its value.

So if you are involved in forecasting for your company – and if you work in any part if the supply chain you are involved in forecasting – own the forecast and all the issues that come with creating a good forecast. You’ll get better results for your efforts.

Your customer doesn’t care about your supply chain issues

While we might be tempted to explain customer service failures based on supply chain issues, in the end your customer doesn’t want to hear this.

I can say this from experience. Here’s the story:

I recently took my Toyota Echo to a local Toyota dealership because the A/C was not working well. I left the car with the dealer and expected to hear back from them within a day or two. After three days I called the dealership to see what was up, and I was informed that the mechanics hadn’t been able to find the problem. So nothing had been done. I got the car back because we needed it and I took it back several days later. Little did I know that I would not see my car again for nearly two weeks.

During these two weeks the mechanics tried several fixes. None of them worked. Turns out Toyota does not stock the compressor clutch that I needed, so the mechanics tried to build one out of parts. They did this three times, and each time it burned up. At $400 a crack that was expensive. Throughout this time I could not get an answer from the dealer as to what was happening.

In the end the dealer shipped in a new compressor and clutch was able to solve the problem. It only took three weeks, give or take a day.

But the issue was not the mechanics or the dealership. It was a decision on the part of Toyota to carry fewer parts in fewer locations in order to save money. In the end it cost them nearly $1500 in parts, shipping and labor – and most of my goodwill.

The lesson here? I really don’t care about Toyota’s supply chain or inventory issues. If they want to sell cars and service them, they need to invest in the inventory that is required to do this well. And if they can’t fix something in a reasonable amount of time, they need to keep the customer informed at all times. Not knowing what is happening – or, in this case, not happening – with my car was quite upsetting.

So remember that your customer doesn’t care about your supply chain issues. Right or wrong, they expect service and timely communication about how you are solving their problems.

And yes, I still do allow this dealership to work on my cars. They are in the process of redeeming themselves.

Getting the basics right – blocking and tackling

Over the last two decades I have watched as supply chain systems and practices have become more and more sophisticated. This has been a good development, as this has meant that supply chains have become more robust and flexible, and more responsive to customer and company needs. This has allowed companies to squeeze significant savings out of their supply chain practices.

But I have also seen a downside to these developments.

As the systems and processes have become more complex, there has been less need for people who truly understand the principles that make any supply chain effective. In addition, with less human interaction, there has been less opportunity for creativity and for exploiting the opportunities that are inherent in every supply chain. I’m afraid that we are heading for a supply chain world where the only role people will have is to push certain buttons. While this will certainly save companies money, since they won’t need to hire people who truly understand how a supply chain operates, it could lead to a decline in the overall knowledge level of the people who are working in supply chain positions.

In my opinion there will always be a need for people working in a supply chain to understand the basics – the blocking and tackling practices – that make every supply chain successful. No system can replace solid human judgement and experience, they can only mimic it. And companies that let this knowledge perish among their people will pay a price in missed opportunities and decreased commitment to supply chain excellence.

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