Let’s start with a Bold Statement. The traditional planning processes, methods, and software are not performing well in the reality we face today. How do I know this? Because there are no companies or people anywhere (another bold statement) that use the output from their traditional planning tools exactly as provided. Everyone puts it into a spreadsheet or some form of manipulation, to “massage” the output and “fix” it. If you don’t do this, you are part of a very small minority, I assure you.
Many of you who use spreadsheets are contemplating the magic of A.I. to do this manipulating on your behalf. It will likely help. But it doesn’t address the root problem.
Many leaders think their team is more capable, or less capable, depending on the results of their heroics and firefighting. Or their ability to correctly guess the action to take.
We need to search for the foundational problems in our existing processes.
One of the statements I’ve been making (bold) is that traditional Materials Requirements Planning has one solution for every problem: Add Safety Stock. This flies directly in the face of most company mandates of reducing inventory. But there is also a powerful takeaway that may not be wrong.
Inventory Positioning and the resulting Inventory Availability can prevent the negative impacts of many issues. Which will in turn give you time to address the underlying problems. Yet our systems today think of inventory as a waste even though it is also the solution to every problem. I’m having trouble squaring this circle.
Here’s my list of underlying, foundational problems that we must address.
- The expectation that precision will work. Everything we do in our traditional planning processes is based on the idea that our plans will execute precisely as expected.
- Related to precision planning is the notion that the target is precise. The farther into the future the target is, the less likely it’s going to be correct. Actually, the farther away it is, the more incorrect it will be. So our plans are based on a moving target, which means even if everything does go exactly according to plan, we will not succeed because we will have hit where the target was, not where the target is.
- The Process Definition. Supply Chain Personnel are left to figure out for themselves the best way to choose when to order and how much to order. Standards don’t exist in today’s traditional planning. If standard processes existed, you wouldn’t have some planners with better results (or the results would be better across the board). How this loophole still exists is a mystery to me.
- Priority, Urgency, and Early Warning System. Traditional Planning has a binary warning system. Okay / Not Okay. There is not a problem until there is an urgent problem. Bold Statement: You can’t prevent a problem after it’s occurred. So we force our Supply Chain people to be in Expedite Mode almost all the time.
- We don’t “protect” our capabilities using Inventory. We think we are doing that, but we constantly fight the mixed messaging from leadership. Don’t miss delivery to the customer but also don’t maintain the inventory needed to achieve that goal.
All of these are related to the design of our planning systems today. I don’t believe anyone thinks these are acceptable. I think everyone has been convinced that there is nothing anyone can do about them. It’s time to realize that we can (and must) solve the underlying problems. I’ve chosen Demand Driven Material Requirements Planning as the approach that does this. But frankly, if you find a better way (that is available today), go for it. But beware those who support a solution that does not yet exist.
Ask me for more information. And if this writing makes you think, then all is good.
