“I hope to soon be in contact with the man who is searching for Noah’s ark.” – Jim Sullivan
It’s early June 1972 and my Mom would do something she’d regret for years. On my 10th birthday she gives me a wooden chess set and a chess book.
I devoured the book, studying the games of the great Jose Raul Capablanca. Then in September the world becomes fascinated with chess and with one Robert James Fischer. The Fischer – Spassky match gathered worldwide attention and put chess on the map in the west.
Fischer would become World Champion, then drop from existence for 20 years – never to play again until 1992. Bobby Fischer became a hero of mine and soon I announced to my parents that I intended to one day become World Chess Champion.
For a few years I was searching. Searching to become the next Fischer. Eventually I’d give up on my dream.
The point of my little personal ditty is that searching can be a dangerous and pointless thing. Especially when the search is fruitless.
Supply chain planners have been searching for lots of things too. One thing that many have been searching for is the optimal order.
Like my quest to become the next Fischer, this is a search that makes little sense.
What, exactly, is an “optimal order”? What criteria would you use to determine its optimality? Weight? Cube? Dollars (heaven forbid)?
What makes this search futile is the paradigm shift in retail planning systems and processes. It’s a fundamental shift that, on the surface, sounds like nothing when in fact it’s a big deal.
Retail planning will see a seismic shift from ordering to planning. For what seems like eternity retail supply chain planners have been worshiping at the altar of orders. A product is either on order or it’s not. Optimizing the next order was critical since that’s all replenishment cared about.
Today smart retailers understand that there is little value agonizing and fretting over the next order. Rather, they are beginning to understand that service and costs can be improved significantly not by focusing on the next order, but by carefully determining a series of planned orders – well into the future (like, say for the next 52 weeks).
These projections can be shared with the supply chain partners who are expected to satisfy these future orders. It makes their job easier and helps to ensure no surprises.
These order projections can also be used to determine future capacities, financial requirements and potential problems. Combined, these projections form a powerhouse of information to be used by everyone in the extended retail supply chain to deliver unheard of service levels, while simultaneously reducing total supply chain costs.
In a world of planned orders, what sense does an “optimal order” make? None, precisely.
That’s because in the new world each planned order is dependent on the previous ones. The planned orders adjust based on what’s happening at the store shelf, only for the upcoming one to become a committed order at the agreed-upon lead time. Trying to optimize this order at this stage could change all future orders.
Does that make any sense?
Why not build realistic and sensible ordering rules into your planned orders, then let actual sales fine tune the planned orders until they are ready to be committed? Wouldn’t that be much simpler, easier to understand and cause less disruption than searching for the optimal order?
The same conclusion I arrived at in my search to become the next Bobby Fischer!