The most common situation in business.
Sales: “We ran out of inventory. You need to keep enough on hand so we can sell.”
Purchasing: “We need a better forecast. We purchase based on your sales predictions.”
Finance: “We need to have less dollars tied up in Inventory.”
Leadership: “We need to meet our goals. On time delivery, Return on Investment, Days of Inventory, Sales Dollars, and Profit, while maintaining Safety and Quality.
The Supply Chain Conundrum: You need to have the right inventory in the right place, at the right time, and in the right amount. But you can’t predict the demand accurately, or precisely. And, even with perfect forecast numbers, the system you’re using only works if there is no deviation from the plan or any kind of disruption at all.
Add in some Sources of Confusion:
Sales is rewarded if they sell more than the forecast. And chastised if they sell less than the forecast. There is no real recognition for selling exactly the forecasted numbers.
Purchasing is reprimanded if they let stocks run out. And reprimanded if they have too much. Yet all activity is focused on the precise Forecast (which we’ve already determined is not correct).
Operations is rewarded if they produce more per day than expected. And frustrated if they are forced to work without stability in the schedule. Yet, by producing more than expected, the schedule is forced to change just to compensate.
Finance tries to balance the payment terms for payables and receivables. Yet also must balance the Inventory dollars as an Asset (good?) with the dollars tied up in maintaining that asset (bad?).
Sounds like a recipe for chaos and only accidental success.
All solutions for Supply Chain must account for this craziness.
Let’s look at your supply chain together.
👉 Contact John to start the conversation.
John Melbye, DDPP, DDOP, DDLP, DDDP, CSCP
Become Demand Driven
john@becomedemanddriven.com
