1970s Montreal Genius
If you happen to be a long-time fan of the Montreal Canadiens hockey team, then undoubtedly the late 1970s was a dream for you. The Habs were on a tear, winning 4 consecutive Stanley Cups and playing some of the fastest and best hockey ever seen.
In the late 1970s there was another Montrealer who was on a tear as well, in this case with respect to inventory flow planning innovation.
In 1975, as Director of Manufacturing Operations and Distribution, Andre Martin lead the creation, development, and successful implementation of the first integrated time-phased planning system in industry. Andre leveraged the Bill of Material (BOM) concept to integrate manufacturing operations from distribution centre to factory floor. Instead of a BOM, he flipped the idea and developed the concept of a Bill of Distribution (BOD). Once we forecast the demand at the DC’s, he reasoned, we could calculate the dependent demand onto the factories.
The Distribution Planning solution was aptly named Distribution Resource Planning (DRP) and adhered to the mantra laid out by Dr. Joseph Orlicky (of Material Requirements Planning fame) to “never forecast what you can calculate”. This in-house development and implementation enabled Abbott to seamlessly manage the flow of products across a three-echelon supply chain – a worldwide supplier network supplying to three factories (Montreal PQ, Brockville ON and Toronto ON), and ten distribution centers across Canada.
Prior to managing manufacturing and distribution operations Andre worked in accounting and finance. Having this accounting background, and coupled with his experience in manufacturing and distribution, Andre realized that they needed to tie their new time-phased inventory flow planning system with Abbott’s financial system.
In 1978 he saw the opportunity of enabling Abbott’s top management team to manage their business to “A Single Set of Numbers” – converting the forecasts and resulting plans into financial, resource and capacity projections.
He also realized that the new DRP solution, along with the DRP/MRP integration could be used as a financial planning and budgeting tool. The projections would form the foundation for the annual plan. As a result, Abbott’s top management was able to use their operating system to put together their 1978 annual budget using the very same system they used to manage their day-to-day business.
Oliver Wight, Abbott’s consultant at the time, created the term Manufacturing Resource Planning, or MRPII, to describe this broader application of the solution and the rest is history.
Loyal readers and disciples (yes, we have a few of those but would love several thousand more!) will realize that Andre’s pioneering work is also relevant and applicable in retail.
For example, consider Canadian national hard lines retailer Princess Auto Ltd (PAL). PAL plans inventory using the Flowcasting process—developing consumer-driven, integrated inventory flow plans that are valid across the entire value chain, including plans that span multiple organizations. Every department—including suppliers—use the projections for planning and to identify opportunities to improve service, cost, and productivity.
The item/store forecasts in units are converted to financial sales projections, and then aggregated to category, department, and sub-department level to provide the starting point for the baseline budget for the upcoming year. The impacts of additional strategies and tactics are then added to the calculated baseline to arrive at the budget, or business plan.
Given the new planning process is always recalibrating based the on the latest information, it has provided the Leadership Team with a continuous, forward-looking critique of how well the business plan is being realized – essentially a Retail Sales and Operations planning process. Instead of looking in the rear-view mirror to evaluate the plan, the Leadership Team has the capability to assess the forward-looking plan and determine where the plan may be at risk – giving them time to make any adjustments necessary to stay on track.
More importantly, they are managing their business to a single set of numbers – having essentially a model of how they wish to do business, spanning their entire eco-system.
It’s a concept that originated in Montreal over 40 years ago – thanks to the pioneering work of, among others, Andre Martin, Oliver Wight, Darryl Landvater and Abbott Labs – and is being realized today by smart, forward-thinking retailers like Princess Auto Ltd.
More Genius from the 1970s
Did you know that during this time, Andre also invented a concept called Game Planning?
He converted the time-phased production plans (developed by calculating production requirements from the DRP-driven plans) to dollars and called it “Game Planning” – since it produced a dollarized view of planned sales, production, shipments, and inventory levels (i.e., essentially the company game plan) for a 2-year planning horizon. The combined views of financial and resource projections allowed Top Management to gain better control of the business.
In the early 1980’s, an Oliver Wight Associate named Dick Ling renamed Game Planning to what it’s referred to today – Sales & Operations Planning (S&OP).
The late 1970s was a special time for the Montreal Canadiens.
The late 1970s was also a special time for Andre Martin.