About Mike Doherty

Mike Doherty

Uniquely Unqualified

Think back to the first microwave that your parents had and what are you likely to see? A rectangular box with three buttons (High, Medium, Low) and a timer dial. Now fast forward to today and what will you find?

As a comparison, one of LG’s more popular models has 33 buttons. What’s the difference between Auto Defrost or Express Defrost? And what happens when you press Less/More? Will any of these really make your popcorn pop faster or taste better? And it’s not easier to use.

Why do products become more complex as they evolve?

My view is that most organizations head down the path to complexity as a result of listening to – and putting faith in -people who are unqualified. Uniquely unqualified. And who are these folks?  Most often, they are your customers and peers!
Customers? Peers? Uniquely unqualified?

Isn’t it the doctrine of good business to listen to your customers? And isn’t the customer always right? Nope and nope.

Consider Apple. They abhor customer focus groups. It’s in their DNA to not listen to their customer. After all, which customer suggested the iPod, or even the iPhone?
Ironically, listening to your customer is often the road to ruin. The issue is that there are too many of them. If you try to accommodate their collective wishes and suggestions, what you do get? 33 buttons on a microwave, that’s what.

It’s no secret that I think most planning solutions available in the market today are way too complex. Part of the problem is that many of them are fairly mature and they’ve done a great job, at least in their opinion, of listening to their customers over the years. People who are generally unqualified to suggest improvements.

Now, don’t get me wrong, I’m sure that good suggestions have come from customers. It’s just that very few companies from what I’ve seen have the courage to ignore the wishes of their customers and market forces and not include additional functionality.

Planning solution simplicity requires paring things away (or not adding them in the first place) when market forces tell you to add. It means removing layers rather than adding them. In short, it takes courage.

Since courage is largely lacking, most mature planning solutions in the market today are too complicated, too heavy and too burdensome. They are difficult to learn and implement, often requiring millions of dollars and years to realize benefits.

As a practitioner who helps companies implement these solutions it’s not hard to see where the uniquely unqualified come from. Most efforts to implement planning solutions are not grounded in fundamentals, or principles of the process.

Consultants and Solution teams focus on installing and configuring the software, rather than on configuring the way people think, so they understand the core principles of the new process.

And the result is telling. If people do not understand the key principles of the process, then they cannot think properly about the new solution. The result is that they mostly end up working hard to make the new solution act and behave like the current solution.

This is all they know because until they are educated and understand the principles of the new process, guess what? They are unqualified to implement the new approach. Uniquely unqualified.

It boils down to courage and the ability to say “no” in an effective manner. Solution providers need to resist the urge to add unneeded functionality, while helping to educate those requesting the “improvements”.

Similarly, consultants and implementers also need the courage to reject the idea of jury rigging the new solution to look like the old.

Can you say “no”? Are you qualified?

Which question are you asking

BeautyQuestion

Recently read an awesome book, A More Beautiful Question, about inquiring and asking more than telling.  Should be required reading for everyone. Got me thinking though…

Most of the advice and thinking about supply chain planning (i.e., demand & supply planning) is about developing and applying new forms of advanced analytics to the wrong question.

My advice: find a better question!  Then you’ll realize you should never forecast what you can calculate!

Repurposed

It’s 1946 and a young Lee Iacocca finishes engineering school and joins Ford Motor Company – at the time, one the most prestigious companies in the world. Lee brings countless suggestions and ideas to his boss, only to hear that same question asked. ”Where has that worked before?”

Undaunted, Lee finds out.

Iacocca learned from his boss a fundamental lesson: if an idea is truly innovative, you’ll find examples of its successful implementation scattered throughout history.  The secret to successful innovation is to import a tested and reliable idea or concept into a business situation where it has never been used.

Repurpose the proven.

Almost everyone working in supply chain has heard of Distribution Resource Planning (DRP). Did you ever wonder where idea for DRP came from? Well, from repurposing another concept. That’s when, back in the 1970’s, a young Andre Martin learned about the concept of a bill of material – a simple idea to calculate components and parts needed to produce a product.

Andre was struggling with how to better manage the flow of inventories between his distribution centres and factories. When he saw the BOM concept he got to thinking. Couldn’t he flip the concept and use it to calculate a bill of distribution?Sure he could. He repurposed the BOM idea and the rest is history.

A number of colleagues and business associates have complimented us on the Flowcasting process. Many refer to it as simple and elegant. Take a POS forecast, by item, by store and effortlessly transform it, apply simply calculations to it, until it speaks the language of the supply chain.

But the idea is not quite so brilliant and we’ve seen this movie before. Frankly it’s an extension of the idea of Distribution Resource Planning (DRP). The idea has been repurposed to extend the thinking and the logic to the store.

While it’s nice to hear people refer to Flowcasting as a breakthrough innovation and to us as innovators, you and I know the truth.

We’re really practical repurposers.

$500 Rule

Have you every noticed that your views on things change when you’re forced to “put your money where your mouth is”? So, you really think that the Leafs will win the Stanley Cup? Wanna bet 500 bucks on that?

Brings you back to reality, doesn’t it? The same concept applies to demand planning/forecasting.

Bias (systemically forecasting too high or too low) is the #1 killer of good forecasts. The biggest problem with bias is its insidious nature – people often introduce bias into their forecasts with the very best of intentions. It may come as a result of being optimistic by nature. Or out of a desire to provide good service, you may feel compelled to add “a little bit extra” to your forecast, just in case.

You know that the demand forecast needs to be a realistic estimate of what you actually expect to happen. Everyone is planning on it. So how can you be sure that you’re not unintentionally killing your forecast with good intentions?

Use the $500 rule. What’s that?

$500 Rule: If you were forced to bet $500 of your own money that your forecast was as close to the truth as possible, would you keep it or change it?

 

Two Dimensions of Demand Planning

Suppose you were guaranteed that a specific investment stock will increase in value by 50% but you weren’t told whether it will happen in 5 months, 5 years or 5 decades?

How much would this information be worth to you?

Not much, right?  Why?  Simple – you need to know both the percentage increase (quantity) and the timing (when). Demand planning is very similar. The purpose of the demand planning process is to anticipate how much of a particular product your customers will want and when they will want it. So, to do a proper job of demand planning, you need to consider two equally important dimensions:

  • quantity (how much?); and
  • timing (when?).

The purpose of the demand planning process is to predict BOTH the quantity and timing. You can’t have one without the other.

Forecasting for Fools

Scott Armstrong is pretty knowledgeable about forecasting processes.  In fact, he might be the world’s leading authority.  Armstrong is a professor at the Wharton School of Business at the University of Pennsylvania.  He’s dedicated his whole life (and he’s 74) to studying forecasting and his book, Principles of Forecasting, should be considered a bible to anyone interested in the field.

Us supply chain planners could learn a lot from old Scotty.

For example, one of his gems of wisdom is about complexity of the forecasting process/model.  He states, “there’s been no case in history where we’ve had a complex thing with lots of variables and lots of uncertainty, where people have been able to make forecasting models or any complex model work.  The more complex you make the forecasting process the worse the forecast gets”.

Hmmm…makes you wonder, eh?

We have entire companies and self-proclaimed experts who are advising companies about how to factor in Big Data, the weather, and a whole host of other variables, all with complex models aimed at sensing and translating and responding.

Maybe most of these folks are fools?  After all, they are forecasting what should be calculated.  And the farther away from the consumer you’re forecasting, the more variables and constraints you’ll need to try to factor in.  Exactly Armstrong’s point.

Don’t be a fool.

Never forecast what you can calculate!

40 Years of Wrong-headed Thinking

Dan Gilmore, in his excellent work with Supply Chain Digest, recently presented research that chronicles 40 years of research and measurements on out-of-stocks in the supply chain.  Despite $billions spend during this time, there has been NO progress.  Here’s a respose to this research from a pioneer in supply chain planning, someone who just might have the answer…

Dan,

The Out-of-Stocks problem in the CPG Industry has been around a very long time and will not go away until we completely change our thinking on how to manage the end to end retail supply chain.

First, we need to acknowledge some basic truths learned the hard way:

  1. The retail store is the beginning & the end of the retail supply chain. It’s the beginning of information flow and the end of product delivery.
  2. Every CPG retail supply chain is actually two supply chains.Today, the information supply chain is broken as every retail node making up the retail supply chain is disconnected from the manufacturer’s nodes and each node is buffered with inventory thus slowing down the ability to respond to true store demand changes.
    1. The physical supply chain: the movement of materials & products from supplier to manufacturer to retailer.
    2. The information supply chain: the movement of consumer demand information from retailer to manufacturer to material supplier.
  3. Having wrapped our brains around these basic truths we then need to take advantage of major breakthroughs that have occurred recently.

Today, it is possible for a retailer and a manufacturer to model and connect their  retail supply chain inside a single computer and drive it, end to end, from a unique store level sales forecast.

Today, it is possible  to  resynchronize every node making up a  retail supply chain  every day based on changes in store level  consumer demand and thus completely eliminate the “Forrester Effect” (also called the Bullwhip Effect).

Today, it is possible for a retailer and a manufacturer to use this model of their retail supply chain and manage it as if one company were managing it.

Today, it is possible for a retailer and a manufacturer, using this “business model”, to create an Integrated Business Plan, identify gaps and take corrective action while there is still time.

Today, there are no secrets anymore on how to manage the end to end retail supply chain, from the store to the factory, and significantly lower store out-of-stocks as well as reduce retailer’s and supplier’s inventories and operating cost at the same time. 

Today, it is possible to achieve a 99.8%  On Shelf Availability (OSA) at the store while reducing overall supply chain inventory buffers at the same time.

Today, there is a proven and well documented business process, and enabling technology, to actualise all of the above and it even has a name: It’s called Flowcasting the Retail Supply Chain

André Martin