Today’s supply chain buzzword is visibility. Every business leader says that we need better visibility.
Therefore, the rest of us run off searching for better visibility. We’ve been searching for a long time now. For how long shall we keep searching? Why haven’t we found it? Or did we find it and not realize it?
Well, “visibility of what?”, you might ask. Some are searching for a better forecast. Better visibility of demand. Very helpful in some ways, but misleading in others.
First, there are companies that have only sales orders. They don’t have forecasts. They have known and confirmed sales orders entered into their Materials Requirements Planning system giving accurate visibility for two years. Do you know what else they have? They have the same problems as everyone else.
So, if companies with perfect demand signals are still struggling, why do we search so hard for a better forecast? Or more importantly, why do we think a better forecast is the only answer?
Second, we all agree that the forecast is more accurate closer in time. My forecast for next month is more accurate than my forecast for six months away. It might be helpful for my parts that have a lead time of less than one month, but less helpful for my parts that have lead times of five months or more.
Third, since forecasts are always being updated, they are always changing. And since MRP is filled with precise calculations, every time a forecast is updated (to make it more correct), it turns your plan into an updating exercise, which may change again, and again, and the chaos continues.
Therefore, the first question is, “visibility of what?” The second question is, “What will be the impact of having that visibility?” And the third question is, “Are the things I’m doing with that visibility actually having the impact they are designed to have?”
In the end, how we define the problem is the route to the solution. If you define the problem as “our forecast is inaccurate.” Then you’ll pursue more accurate forecasts. But if you define the problem as “we are unable to keep the right amounts of inventory in stock,” you might find the path to the solution is different.
The beginning is something I’m calling the “What If?” approach. What if we follow your advice? What if we choose solution A instead of solution B? The idea is to approach suggestions with a simulation perspective. What if we do (or don’t) do this?
Today’s approach is more of a “Now what?” approach. Okay, we tried one way, now what?
The key to this change is to consider many perspectives and include the real complexity. Not just “what will happen if we give a discount on volume purchases,” from a sales perspective, but also from a logistics, supply chain and financial perspective. Not just “what if we reduce our inventory,” from a financial perspective, but also from a sales, operations and supply chain perspective.
Asking “What if” requires playing out scenarios in a group of people containing various perspectives and all players related to the scenario. And it provides a chance to learn and evaluate the possibilities. Contrast that with moving forward, learning the consequences in real life and then asking, “Now what?” This route only results in firefighting and chaos.
Choose your approach wisely. Demand Driven MRP brings this thinking to life.
John Melbye
