Why Less is More in Supply Chain

Don’t you find it funny that, no matter what the topic, everyone wants more? More time

More speed. More gizmos and gadgets. More money. More fame. Face it, everyone wants more.

In the realm of supply chain planning, everyone wants more forecast accuracy, more service, more inventory turns, more speed. More, more, more. How, then, do you get more?

The answer is often less.

For example, look at many collaboration efforts. Retailers share more and more
data with their trading partners, hoping and expecting this to help improve forecast accuracy and fill rates. There is so much information now being exchanged that supply chain partners literally don’t know what to do with it all. So they continue to do what they’ve always done and achieve the results they’ve always achieved. What’s worse is that many people believe that the continued mediocrity must be because of a lack of information. So they provide more still.

Maybe the solution is not more, but less. Much less.

Contrary to popular belief, there is no such thing as a “push” system in the retail supply chain. That’s because the retail supply chain includes the consumer and you can’t push product into the consumers’ hands. By properly forecasting this demand – for each product at each retail store – you can eliminate all other forecasting in the supply chain by calculating the chain reaction of demand. You need to forecast store level consumer demand anyway, so you might as well get the most of it. Less is best.

In terms of collaboration, why send gobs and gobs of disembodied information back and forth?

Every planner in the extended retail supply chain is trying to answer two questions:

  • What do I need to ship?
  • When do I need to ship it?

Think of a distribution manager mid-way through the supply chain. The answer to these
fundamental questions may or may not be buried in the terabytes of store level POS history, inventory balances and in-transit shipments, but it’s like looking for a needle in the haystack. Just because the information is plentiful, that doesn’t mean it’s useful. Why not just give actionable information? Again, just use the chain reaction of demand to tell him what he needs to ship and when he needs to ship it. No more than that.

Software companies sell solutions that try to factor in every conceivable constraint in the supply chain. These are complex algorithms that require enormous amounts of data and brainpower to decipher the output. And once you have it, you somehow have to explain it to management so that they can take action.

Why not just give people the right kind of information, presented in the right way, so that they can anticipate and resolve problems before they occur? You’d be surprised how many so-called constraints can be circumvented altogether with a little human ingenuity.

So, if you choose to subscribe to the less theory, what do you get in return? Ironically, more!

More forecast accuracy because you focus all of your forecasting effort on the store level
consumer demand.

More service because as conditions change, you update your chain reaction of demand
when there’s still time to react.

More profits, because all of the complexity that’s been built up in the pursuit of MORE can be stripped away.

More peace of mind, because you can actually understand your supply chain without the
help of a PhD in Operations Research.

If you want “more”, you have to think “less”!

Photo Credit: sandpipers81

Related Posts

The Golden Rule of Forecasting

The Emperor’s New Clothes

The Drum Beat of Consumers

 

 

 

Latest posts by Demand Clarity (see all)