I came across an interesting discussion the other day. The initial question? Who in an organization is responsible for resource planning and scheduling? The responses all centered around the Planning dept (titles may vary). And all of it stems from a Sales and Operations Planning process, whether formal or informal.
I’ll give you a minute to choose your position.
I’ve been blessed with distance. Distance from the problem, distance from a historical bias, distance from a traditional answer. I’m also blessed because I know that I don’t know everything and that circumstances often dictate different answers.
The discussion highlighted what I’ve been trying to sort out in my own head, a belief that we’re starting at the wrong place. That we haven’t identified the problem properly and that our traditional thought process needs a revision.
What do I mean? Glad you asked.
All traditional perspectives start with Demand. How much are we going to sell, how much have we sold, how can we increase the sales of our product? And we want to look at this through the traditional lens. Sell by finding new customers or increasing sales to existing customers.
A simple analogy shows a give and take, an iterative approach, or a limited approach.
I have a car that can hold 6 people comfortably (including the driver). So I start planning my trip with this in mind. Let’s call it basic Capability. I don’t start by trying to figure out how many people to invite, I start with how many people I can comfortably include.
And if my invitations result in more than 6, I need to update my plans. If I include a second vehicle that holds 4 people, I have increased my capability (some might say capacity) to 10. Or, I can take two vehicles that hold 4 people each. Would any of you suggest that one person drives by themselves, while 6 of us ride in friendship?
The difference is that we start with Capability. Demand is a very close second consideration and is what causes us to increase or decrease based on the options that are open to us.
Why don’t we do this in manufacturing. If we have the capability of producing 100 units per day, with a stretch capacity of 130 (using short-term overtime), then we can know if our capabilities match our requirements. And we can adjust using the levers that are available to us (lead time, an added shift, price increase). We can even reward customers who evenly schedule demand instead of the traditional one large order delivered immediately.
Once we understand that our capability is a range and the demand is likely a range as well, we can better accommodate the relevant fluctuations.
But if we start with demand, then everyone in the rest of the supply chain is likely to face chaos. Can you tell me you have a reactive supply chain that is nice and calm?
What if we had a “planning department” focused on maintaining a level of capability? And a Sales Team focused on using that capability. With the communication between them when there is a widening gap between capability and demand. You might want to tell me that this is how it works today. But if you look closely, I believe you’ll find that it doesn’t.
John Melbye, Thought Leader
Become Demand Driven
