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A Brief History of IBP

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“Andre Martin, in my opinion, should be recognized as a true management scientist.”

                    - Oliver Wight

In 1988 the renowned British theoretical physicist, Stephen Hawking, published a great book entitled “A Brief History of Time”. It gave ordinary people a layman’s glimpse into the potential origins and the phenomena of the universe.

If a book were to be written about the History of IBP – Integrated Business Planning – then the best person to write this book would be my long-time colleague and Flowcasting co-author, Andre Martin. He’s the pioneer behind many of the most widely adopted concepts and ideas in integrated planning and integrated business planning.

Here then, is “A Brief History of IBP”…

It’s May 1975 and Andre Martin, then Director of Manufacturing & Distribution at Abbott Labs Canada, attends a 5-day Material Requirements Planning (MRP) class in Boston delivered by Oliver Wight and Walter Goddard. After taking the class, Andre asks Ollie if he will become a consultant for Abbott Labs.

In June 1975 Oliver Wight agreed to work with Abbott Labs in Canada and guide them in their implementation of what they would refer to as a “Closed Loop MRP system”, focused on manufacturing and production planning. Early on in their work together, Andre would inform Ollie that something had been bugging him for quite some time.

According to Andre, the planning was too focused on the factories and not on their customers – their internal distribution centers (DC’s) – since they were the ones that needed the product. There was a never-ending battle between production and distribution, and he needed to do something to resolve it. Ollie asked Andre, “what do you want to do?”.

Andre responded, “I think we should take the concept of requirements and resource planning to the DC’s and integrate it into one system with MRP. Andre explained to Ollie that instead of a classic bill of material (used to break down the materials needed to make the products) it was like an upside-down bill of material – essentially a bill of distribution. The needs of the distribution centers would drive the production requirements.

They both realized that no system existed to enable this. They would need to build and implement it. Ollie recommended a young technical wizard, Darryl Landvater, whom he was sure could help. And, low and behold, together they would build and implement the world’s first Distribution Resource Planning (DRP) solution, integrated with MRP – thereby taking the concepts of MRP to distribution.

In the summer of 1977, during a project review meeting, Ollie was stressing the point to Andre about the need for and importance of the management team at Abbott to have monthly production plan review meetings. Andre, being a professional accountant, told Ollie he was having difficulties convincing the CEO, Jim Andress, and his management team to sit down monthly and review the production plans.

Jim Andress was a West Point graduate and Lieutenant Colonel who had fought in the Vietnam war. He was the ultimate team player and extremely practical and resourceful. In Nam, he once traded a helicopter to get back his captured men. At Abbott, the management team was connected at the hip.

Andre shared an idea with Ollie, where he believed he could get management’s attention if he took the production plan, convert it to dollars then tied it into the income statement down to the gross margin level. Ollie was floored and asked him what he had in mind. Andre proceeded to explain that he had been thinking for some time about integrating Abbott’s financial system with his new operating system (the integrated DRP/MRP system).

And they did it. Oliver Wight, in the spring of 1978, declared that, based on the work done at Abbott Canada, Manufacturing Resource Planning (MRPII) was born.

To be crystal clear, the Abbott MRPII system was developed to be one unique system driving all key operations within the company (i.e., sales, distribution, manufacturing, purchasing, quality assurance & finance, etc.) To this day Andre is not sure this was ever replicated anywhere. Today many companies have implemented ERP systems, and these systems/databases remain essentially systems of record. By expanding the planning horizon to two years and adding AI assisted, collaborative workflows that sit around the core, many companies could (and probably have) replicate what was done at Abbott Labs in Canada.

At the time, they called the concept “Company Game Planning”. Others had given it the name we know today – Sales & Operations Planning. The CEO, Jim Andress, called it Executive Sales & Operations Planning. According to the President of the division, it enabled people to “view the business through my glasses”. Seeing “the other person’s side of the story” and working together to solve problems builds teamwork, and this occurs at all levels of the organization.

At Abbott, after the financial integration of their closed loop DRP/MRPII system Andre had convinced the CEO, Jim Andress, that his management team had a wonderful and unique opportunity to use their integrated operating/financial system for developing their annual budget. The integrated system contained information that represented their business model going forward for two years and, as such, they had a true model of their business within the system.

Once a year, at budget time, the information contained in the DRP/MRPII system was replicated on a separate hard disk. This enabled the Abbott management team to save enormous amounts of time each year developing their annual financial budget.

Once the budget was completed and approved, the hard disk was kept separate from the ongoing DRP/MRPII operating system for future reference. The data on the hard disk was used monthly as a reference for what Andre called “Operations Gap Planning”. This was a monthly exercise, comparing the projections in the ongoing DRP/MRPII system with the budget numbers contained on the saved hard disk. Monthly gaps were identified, and action was taken to reconcile and close any gaps.

In the fall of 1979, Andre left Abbott labs to join Oliver Wight and Walt Goddard. One month later, Oliver Wight Education Associates were born and seven other consultants joined.

Not long after, in January 1980 Andre developed and started to teach two classes: DRP and Financial Management. Looking back, the financial management class should have been called “Company Game Planning” because that is what he had called it at Abbott. In any event, in the class he explained, in excruciating detail, how a company CEO could use his DRP/MRPII system as the enabler to have the entire management team march to the same drumbeat.

Andre ran this class for 11 years and during that time George Palmatier and Tom Wallace were two Oliver Wight consultants who attended his financial management class. Tom Wallace also visited Andre at Abbott in Montreal in the late 1970´s to see for himself Abbott’s “Company Game Planning” approach.

George, however, took a different approach. He had Andre visit his company Bentley Nevada in Lake Tahoe in the summer of 1980 to give his financial management class to 25 of his people. In the class there was the CEO and the entire management team.

George joined Oliver Wight Education Associates in 1986. Having a background in marketing, George packaged his learnings from the financial management class and his own experience at Bentley Nevada and came up with the term Integrated Business Planning (IBP) to help educate and explain the concept to others.

Currently, the Oliver Wight organization is perpetuating George’s work in IBP.

Andre left the Oliver Wight organization in 1990 to pursue his dream of a totally integrated retail supply chain from the factory to the consumer, a concept he called Flowcasting – that is, casting or calculating the flows of inventory across the entire retail supply chain. In 2006 Andre would co-author the book “Flowcasting the Retail Supply Chain” to help outline the concept and how retailers could run their businesses using the principles and concepts he had proven in distribution and manufacturing.

Andre formally retired in 2016, though he still does contribute his ideas and thinking to those who are still pursuing the vision (including yours truly).

It should be noted that IBP is internally focused – with the goal to get everyone in synch within an organization with respect to sales, inventory and production planning. Today, in retail, we’re working to take the IBP concept cross-company to something people have called Joint Business Planning (JBP) – that is, working closely between retailers and their strategic suppliers to develop joint plans to grow each other’s collective business.

Working closely with key suppliers is a concept that was initially started by Andre’s colleague, the late Robert Bruce, former Vice President, Supply Chain Strategies, Wal-Mart Stores. He was the early proponent of what became known as CPFR – Collaborative Planning, Forecasting & Replenishment. When Robert initially conceived the idea, he envisioned it as CFAR, Collaborative Forecasting & Replenishment.

Over time, early adopters of the thinking added the planning component. While the idea of collaboration between retailer and manufacturer made sense and endures, CPFR had one major design flaw – each organization was collaborating on the retailer’s order forecast, with each company developing their forecasts independently.

Of course, the concept of Flowcasting solves this design flaw and takes CPFR to the next level, enabling Joint Business Planning. In a Flowcasting/JBP process there is only one forecast for the retailer/supplier to inform and plan to: sales to the end consumer. All other demand and supply projections can be calculated from this.

What makes JBP such a powerful and value added concept is the shift in thinking it enables in the retail/CPG supply chain…retailers and their supply partners can collaborate on the inputs that drive sales and the joint plans, not the outputs…the outputs are the resulting projections, converted to various languages of the business that teams use.

To highlight the significance of Joint Business Planning between retailers and their key trading partners, consider Kraft Foods. Kraft would only need to work together with eight (8) retail customers to cover 83% of their annual volume. Together they could plan activities and strategies to increase end-consumer sales, and all other resource projections would be calculated and shared to provide complete supply chain visibility. Together they could develop joint plans and determine situations where they could take advantage of potential opportunities and/or avoid potential issues before they happen.

We’re obviously not there yet, but that is the vision.

And, like most vision’s, it starts with pioneers – folks who, like Oliver Wight himself once said “move the ball down the field”.

Integrated Business Planning moved the ball down the field, thanks largely to the pioneering work of Andre Martin.

Now you know its history.

Objections to Flowcasting

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I recently published an article about how Flowcasting was built on bedrock, rather than buzzwords. My argument is that the concept of Flowcasting is architected on a series of what I believe are timeless, fundamental supply chain planning principles. You know, like “never forecast what you can calculate”, and so on.

A reader sent me a note about the article, outlining two major objections to my thinking. Here’s what they said…

“Hello Mike, I have two major objections to this article:

First one is that “The entire retail supply chain (or any industrial supply chain) is driven only by a forecast of end consumption” is highly flawed. It does not consider lead time variability, and overall, any other kind of variability

Second one is the narrowed view of having one “valid future”. This assumes you are planning against a fixed demand scenario (most likely the average) while one cannot act as future demand is strictly known”

I was tempted to reply something like this… “Hello, thanks for the comments. Feel free to clear off with your negativity and lack of understanding.”

However, upon reflection, that seemed a tad harsh and didn’t address their queries. So, I decided a more proper response would be more appropriate.

Here it is, essentially…

“Hello. Objections are always welcomed, and thanks for your comments. What I was trying to do in the article was to outline the fundamental principles of Flowcasting and explain why I believe they have and will, endure.

In terms of your question regarding an industrial supply chain being driven by end consumption, I was referring to the disconnectedness in the retail supply chain. For example, it’s very common for a retailer to have one system/approach for stores, one for their DCs and no sharing of future projections to suppliers. Flowcasting connects it all in one integrated approach, using the principles of time-phased planning and Distribution Resource Planning (DRP) – the integrated supply chain is connected by dependent demand from consumption to supply. And, since the upstream nodes are dependent on their customer nodes, the entire supply chain can be connected by developing and maintaining an up to date forecast of end consumption. In retail, that’s a forecast of consumer demand, with all known demand influencers (e.g., promotions, etc.) factored into the forecast and the only forecast needed in the retail supply chain.

In response to your comments around variability, you are right – there is lots of variability in the retail supply chain, or any industrial supply chain. However, this is managed by supply chain constraints and stocking policies, which can be time-phased. Of course, forecasts will always be wrong and that’s one reason we plan using safety stock, or planograms at store level that aim to dampen the impacts of this variability, while keeping inventory available for consumers to purchase. For seasonal products, the variability in the weather (e.g., when will spring happen in the prairies in Canada) can be mitigated by planning inventory flows earlier than the season usually starts, just to ensure inventory is positioned for sale should the season break early.

In response to your question regarding lead time variability, a lot of it can be dramatically reduced by daily replanning and sharing those updated plans up and down the supply chain. From experience, if the retailer does a decent job of sharing stable supplier schedules (essentially projected purchases by product) with their merchandise suppliers, this helps suppliers deliver on time and to a consistent lead time. That’s also true for internal operations teams – since the Flowcasting projections are converted to their language of the business (e.g., cube, volume, capacity) then these teams can pick, pack and deliver to a consistent lead time. This is not theory; it’s happening today.

In terms of a valid view of the future, for operational purposes, Flowcasting uses a forecast of the “most likely” consumer demand. While probabilistic planning has many proponents (and I agree, I do see where it could be very helpful) at some stage, the supply chain is governed by actuals. For example, consumers don’t buy probabilities in stores – they buy products in specific quantities. Therefore, stock transfers/purchase orders flowing from the integrated Flowcasting plans have fixed quantities and the process calculates those quantities using the “most likely” estimate, built on top of policies that cover variability.

In summary, several retailers use what I would call the Flowcasting concept and have increased daily in-stock from the 92-94% range (the industry average) to 97-98% while also improving enterprise inventory performance and costs.”

So, to the respondent to my article, Thank You for the objections. They help me/us to better understand where people’s thinking is and give us the chance to respond – to hopefully either enlighten the reader or challenge us to improve the Flowcasting concept.

A win-win either way.

Chopping your wood, warms you twice

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Henry David Thoreau, in 1854, said something very prophetic.

“Every man looks at his woodpile with a kind of affection. I love to have mine before my window, and the more chips the better to remind me of my pleasing work. I had an old axe which nobody claimed, with which by spells in winter days, on the sunny side of the house, I played the stumps which I had got out of my bean field. As my driver prophesied when I was plowing, they warmed me twice – once while I was splitting them, and again when they were on the fire.”

The moral is that the process, or the journey, is as rewarding as the result.

It turns out, that chopping your own wood is important for helping to change your thinking and your work behaviors.

Implementing a concept and business process like Flowcasting, in retail, requires people to change their current work practices – both internal teams and external ones. Education, as we’ve often outlined, plays a crucial role. However, it’s not enough. People need to experience the new process and get comfortable with the new ways of working. How do we typically suggest people do that?

With what we call a process prototype.

A process prototype is a day-in-the-life execution of the new process, using real, company specific data to “experience” or simulate one or more key planning scenarios – for example, product introductions and discontinuations, promotions planning, and seasonal planning to name a few big ones in retail.

End users are guided through each of these scenarios by more knowledgeable and experienced project team members. Crucially, however, the end users are the ones who operate the keystrokes and execute the new process – effectively chopping their own wood.

This helps people turn the educational theory into practical applications as they get to see, develop, manage and revise real forecasts, replenishment plans and supplier schedules for various business scenarios. In some prototypes they can even experience new collaboration approaches – for example, how demand planners, merchants and suppliers will work together in the new process to produce promotional plans that are agreed upon and executable.

For the project team who’s leading the change, process prototypes are invaluable. You get the see how well the educational program instilled new thinking, as well as getting early feedback on the newly designed processes from the people who’ll be executing it. You also often get good ideas to improve the design. Incorporating these ideas helps the change effort, as people see that they are being listened to. Invariably you’ll also get ideas that aren’t so great, often rooted in maintaining the status quo. These are also valuable as they help uncover where additional education and coaching will likely be needed.

Personally, I’ve had good success using process prototypes (having people chop their own wood) but I’ve been thinking about taking the concept up a level, so to speak.

To date, we’ve only done process prototypes with the planners who’ll execute the new processes – sometimes, to be fair, also including key suppliers to get their feedback and suggestions. An improvement, I believe, would be to develop and execute process prototypes for the senior and executive leadership teams. I believe that would help leaders better understand the new day in the life for their teams. And a process prototype where executives could see, execute and collaborate on a process like retail sales & operations planning would be valuable, but also help to cement why the concept of a single set of numbers is important in retail planning.

Of course, this is not really a new idea, and the best retailers do something like this regularly. Retail leadership teams often work many days a year in their stores – helping customers and doing the work that’s needed to deliver a brand’s promise. A very valuable learning experience and my idea would be to take this thinking to the planning processes. It’s really part of what folks call experiential learning.

David Kolb introduced the idea of experiential learning in 1984. It’s a simple concept – you basically learn by doing and it comprises four elements: concrete experience (experiencing something firsthand); reflection on and observation of that experience (thinking about it); abstract conceptualization based on the reflection (learning from the experience); and active experimentation (putting the learning into action).

A process prototype is experiential learning and is like chopping your own wood. It will warm you twice – once when you do it in practice, and then again when you do it to deliver actual business results.

Order From Chaos

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A schedule defends from chaos and whim. – Amy Dillart

Retail Systems Research recently surveyed 133 US retailers of various sizes ($250M+) and across 5 verticals on the subject of tariffs. The authors were trying to understand how retailers view the tariffs in the short and long term and how they are responding to them.

Some of the results were highly predictable – most are feeling the squeeze of trying not to alienate price conscious customers at a time when their cost of goods are increasing because of forces out of their control – but there were also some somewhat shocking surprises. A significant majority believe that in the long term, “the benefits from the current tariff policy will ultimately outweigh the short-term drawbacks to our business”. Those expected benefits, they believe, will flow from increased onshoring of manufacturing in the United States.

But there seems to be some inconsistency (cognitive dissonance?) at play, as the authors note:

“Most retailers excluding those selling fast moving consumer goods believe that robots will perform US-based manufacturing tasks. Yet they also believe that renewed manufacturing in the US will create a significant new job market. It is unclear to us how to reconcile those two opinion sets. It isclear retailers are all feeling quite positive about near-sourcing and ultimately benefits will outweigh the risks.

Again, it’s hard to reconcile these seemingly divergent opinions (remembering that most retailers don’t think they can survive even a year of tariff-driven retailing). It is emblematic of our country as a whole today: torn between the need for more self-sufficiency, yet unsure how to get there from here.”

I guess that’s chaos for you.

It’s a fascinating study and also a glimpse into the future for US consumers on how retailers are planning to respond to the tariffs.

They conclude with 7 recommendations for retailers that could be applied to chaos in any form (pandemics, natural disasters, financial crises, etc.). Six of those 7 recommendations are coded directly into the DNA of Flowcasting and – in our view – should be a “way of life” for retailers even in times of relative “calm” (or maybe the correct term is “normal background chaos” that always exists in retail, even if they’re not talking about it on CNN).

Acknowledge The Chaos

2025 has proven to be anything but normal, as an environment of wildly fluctuating tariffs has completely upended the relative stability retailers – and their supply partners – were expecting at the beginning of the year. The hard truth is that our industry is now trying to plan – what to buy,what to sell, how much demand there will be, how much supply will be needed – in an environment when planning is nearly impossible. Acknowledging this chaos is now the first step on the journey, as all indicators point to this being the “new normal” for the foreseeable future.

In Flowcasting speak, we call this “documenting your assumptions”. When you don’t know exactly what will happen in the future (and who really does?), you need to gain consensus on your best guess and then anchor your plans on that. As time unfolds, the assumptions you made may not hold water (more on that below), but at any point in time, everyone knows the thought process that was driving the plans.

Embrace ‘Sense And Respond’

The plan may be out the window, but that doesn’t mean a new plan shouldn’t take its place. We advise retailers to use the data available and new analytics to sense and respond to changes in market conditions as quickly as they possibly can. Just as it was during the pandemic, this is a time to get creative. Retailers have shown – time and again – that when backed into a corner, they are more than capable of adapting.

Throwing plans out the window and creating a new one to take its place is what Flowcasting is really all about. For every item at every location every day. While retailers writ large have shown that “they are more than capable of adapting”, those with fully a fully connected planning process from the store shelf back to the supplier can adapt far more quickly, accurately and efficiently.

Forecast Continuously And Adjust

Forecasts need to be updated in-season as the selling period unfolds to make short-term adjustments. This capability is empowered by new data (customer, product, competitor, and market) and the analytical tools that can turn those data into insights.

This recommendation goes hand-in-hand with “sense and respond”. With Flowcasting, forecasts are updated daily for every item at every selling location with current sales. As far as “turning those data into insights” goes, the continuously updated demand forecasts drive a fully integrated end-to-end model of the supply chain that updates the product flow plans from the store shelf right back to the supplier, also on a daily basis. What could be better than that?

Recognize That Scenario Planning / Predictive Modeling Is Vital

Few forward-thinkers would deny that the world will become more unpredictable with time. Weather events, social norms, wild swings in the geo-political world – all happen faster and less predictably than at any time in the recent past. Retail Winners view their ability to use predictive modeling techniques as key to helping them to react much more quickly to supply chain disruptions and sudden shifts in demand.

Digital transformation and the technologies it employs makes it possible for retailers to predict all kinds of unforeseeable patterns before they occur – to model future states – and react to them faster once they do. This has moved from being merely a winning behavior to becoming essential to survival.

With a realistic model of the supply chain constructed in a single system, scenario modeling is very quick and easy to do (i.e. “plug in some new assumptions and see what happens”). Not only can different demand scenarios be modeled to determine the impact on sales, costs and service, but you can also game out various supply side strategies that can be deployed in response. Once you have a complete plan that looks like it will work, you can commit the changes and start executing to it across the board. If it starts to look like it’s not going to work, you can change it.

Trust That Pricing Solutions Can Help – Even In Pricing Chaos

Consumers continually cite price as a primary value attribute, and retailers continually tell us price is something they need to get right. New technologies can bring advancements to pricing right now – not in some distant future. RSR’s take is that retailers simply cannot afford to overlook this opportunity. Price optimization solutions have improved to the point that changes as granular as SKU/location can be recommended daily based on dynamic demand and inventory availability.

Whether retailers want to be that granular and fluid is another matter, but (especially with the continued adoption of electronic shelf label, or ESL, technology in stores), retailers could be better able to maintain profitability even in the face of wildly fluctuating cost-of-goods, by taking advantageof what new pricing solutions have to offer.

While this recommendation is not in the direct purview of Flowcasting (pricing is taken as an input and the model does what it’s told), current and planned changes to pricing can be fed in at any level (right down to item/store/day if desired), forecasts can be updated at any level and the impact to the financials can be rolled up from there.

Maintain Flexibility At All Costs

The COVID-19 pandemic taught a great many lessons to retailers. The paramount need-to-know what inventory you have – and where – was just the beginning. How quickly a brand can change its course of action to deliver the right products to where they are needed very quickly is a lessonin the importance of flexibility that cannot be forgotten without creating risks to business survival.

Flowcasting allows not just the modeling of your supply chain as it exists today, but future dated modeling of planned changes to your demand picture, network flows, stocking policies, etc. right down to item/location/day level. And once you’ve modeled it, the system automatically executes the product movements at the right time.

Keep Every Eye Possible On The Supply Chain

The ability to monitor the supply chain in real time and react as necessary, using digital twin technologies to evaluate disruption scenarios and prepare supply chain to minimize financial impact, and the ability to enable “real time inventory management/visibility” are all top-of-mind capabilities for retailers.

Unlike standard computer assisted ordering approaches that only evaluate whether or not it’s time to request more stock on specific ordering days, Flowcasting recalculates demand and supply plans for every item at every location every day. With a complete model of the entire supply chain in a single system, it’s the ultimate digital twin that always has its eyes open.

It would be terrific if we could precisely predict the future, but that’s not possible even in times of relative stability. To the extent that you can come closer to this goal by collecting more information and improving your assumptions, by all means have at it.

But experience has taught us that the real secret to achieving maximum customer service with minimum inventory is not so much accurate forecasting, but continuous replanning.

Built on bedrock, not buzzwords

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“As to methods there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.”

                    - Ralph Waldo Emerson

Arthur Mesher is a supply chain legend and inductee into the Supply Chain Hall of Fame. He’s known for introducing the foundational “Three V’s” framework—Visibility, Variability, and Velocity—a widely adopted model for understanding and improving supply chain performance.

Art recently published a fantastic paper “The Supply Chain Awakens: A Call for Awareness in the Age of AI”. In it, he rails against solution providers, consultants, academics and others who use buzzwords and consultant/solution-speak. He wants people to get back to basics and fundamentals and believes, as do I, that this is needed in supply chain management.

In his paper he made, in my humble opinion, a very profound statement.

He said, “build on bedrock, not buzzwords”.

I love that and agree completely.

If you’re going to build and design something, you’d better make sure it’s built on a solid bedrock – much like a house or high-rise building. If the foundation is not solid, eventually it will collapse.

Course, this got me thinking about Flowcasting. In my opinion (and I believe it’s the opinion of the original four horsemen of Flowcasting), the concept of Flowcasting is architected on a few, timeless, enduring, bedrock principles:

Never forecast what you can calculate
Did you know that this fundamental principle that Flowcasting is architected on is over 50 years old? Dr. Joseph Orlicky (of MRP fame and a planning pioneer) made the profound statement in the 1970s. The entire retail supply chain (or any industrial supply chain) is driven only by a forecast of end consumption – for retail, this is the consumer sales forecast, by product, by selling location, in units, time-phased over a long planning horizon (52+ weeks). All supporting partners in the supply chain have their time-phased product requirements calculated – based on the forecast and inventory rules and policies/strategies amongst the various participants in the network.

A valid simulation of reality
A key principle of the process is that its underlying goal is to provide all partners with valid simulation of reality – that is, a valid view of the future, based on what’s currently happening and what’s planned. If you know something about the future that will affect consumer sales, it’s included in the forecast. If you want to change supply requirements sometime in the future, then it’s in the supply plan. At any moment, the projections that the extended business is using is the best view of the future – it may not come true, but it is the current plan.

Continuous replanning
Flowcasting re-forecasts and re-plans any product and their extended projections as often as something changes. That can be in real time, hourly or daily. At any time, Flowcasting provides all partners in the supply chain with valid, up-to-date, actionable projections.

A model of the business
Since the Flowcasting process continuously plans from consumption to supply at the most granular level (by product by location) over a long planning horizon (e.g., 52+ weeks) then the projections provide the retailer and their stakeholders with what we call a model of the business. That is, visibility of all projections, including sales/demand, inventory, receipts, purchases, resources and capacities in any language of the business (e.g., units, dollars, cube, etc.). This allows for continuous calibration of how well the operational plans are delivering to business objectives. It also dramatically improves collaboration between retailers and their trading partners and collaboration amongst internal teams.

Don’t commit until necessary
You don’t buy milk until you need to, right? The supply chain should operate on the same principle. Product is committed/ordered when the planned shipment has reached the time needed to pick, pack, deliver and receive from their origin to their destination. This is true for all planned shipments, regardless of volume – even promotional purchase orders are ordered at the same lead time as regular volume (that’s because everyone has extended visibility into future requirements to use for planning and would have already planned that volume).

Do I believe that the concept of Flowcasting will stand the test of time?

Yes, I do.

Because it’s architected on these fundamental, timeless, enduring principles.

Because it’s built on bedrock, not buzzwords.

Shaping the Plan to Your Will

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I am a man of fixed and unbending principles, the first of which is to be flexible at all times. – Everett Mckinley Dirkson

As a retailer, if you can accurately forecast the impact of your promotions – down to item/store level – within a narrow range, then everything will be fine.

Umm, okay, that sounds great but what if – hypothetically speaking – you’re not always able to do that? Then what?

Flowcasting has been fairly accurately described as a demand driven supply chain planning approach, with “demand” in this context referring solely to pure demand from consumers at the shelf.

In order for Flowcasting to work properly, the forecast of future demand at each item/store must be representative of what you expect to sell in every planned week in the future. While the starting point for the forecast can be derived mathematically by detecting patterns in history, it needs to be augmented when you know something about future consumer demand that will be different from the past (sometimes referred to as “demand shaping”). In this case, you know that you’re going to advertise a price drop to your customers in Week 9:


In the example above for an item at a store, we expect to sell 64 units on the promotion. This store needs to maintain 20 units of minimum stock at all times to keep the shelf display looking presentable. Flowcasting logic ensures that the Projected On Hand will never fall below that Minimum Stock in any future week, so as a result, the high expected promotional demand in Week 9 triggers 66 units to arrive at the beginning of that week (all requirements rounded up to shippable packs of 6 units). With a 1 week lead time, that 66 units is seen by the servicing DC as a shipment that will be made to that store in Week 8.

We’re only looking at a single store here and there are a variety of ways to have the promo uplift applied (top-down based on proportional contribution to past total sales,  promo sales or baseline forecast, elasticity curves, machine learning based approaches, etc.). The key point here is that demand must be appropriately shaped and represent what you actually expect to sell.

What we have here is a really good plan… If you’re confident in your promotional forecast and if you’re just going to put a promo tag on the home location. For a lot of products (e.g. those that you’ve promoted frequently at the same price with no additional merchandising support), this might be just fine and dandy.

But what if you need product to be in the store earlier or in greater quantities than required just to support expected sales? This could be to support the set up of off-shelf displays or cover for upside forecast risk (particularly if shipments to the store are relatively infrequent and there may not be enough time to do a “mid-course correction” once the promotion starts).

This need is sometimes referred to as “push/pull” or “decoupling” and it can be a real challenge, especially when your supply chain is… well… decoupled.

Flowcasting is uniquely capable of solving this problem quickly, precisely and well in advance so that everyone (store operations personnel, support office planners, buyers and suppliers) can see what’s going to happen.

Because Flowcasting connects the entire supply chain from the consumer to the supplier – it doesn’t support “decoupling” – it completely invalidates it.

For example, suppose that the item we planned earlier will be supported by an off-location display of 30 units in addition to the 20 units required as a minimum on the shelf. Furthermore, the stores need to have sufficient stock a week ahead of time to organize their merchandising teams to set up the display.

In Flowcasting, this is executed as a simple, future dated temporary change to the minimum stock:

Instead of stock arriving just in time to support sales, a large shipment to support the additional display will arrive the prior week, while the additional stock to support the sales uplift will arrive later.

Okay, but what if you’ve never promoted this item at this price point before? The forecast is your best unbiased guess at what’s going to happen, but you would rather have additional stock at the store than risk running out.


Here, we’ve set our minimum stock during the promotion week to ensure that we’re covered if we sell double what we expect.

What if this store can get multiple shipments during the promotional week? You can instead apply a safety stock uplift to the distribution centre plan so that the stock is positioned there to quickly refill stores that are selling through it more quickly, while not overloading the stores that aren’t.

Or you can split the difference by adding some of the additional safety stock to the stores and some to the DCs. Or… you get the idea. All nodes are planned and all nodes are connected, so the effect of changing the shape of the supply plan is precise and the impact on all nodes is transparent.

And by planning in this fashion (shaping the supply plan separately and independently from shaping the demand), there is an additional advantage over pushing stock out via allocation: continuous replanning. The planned shipments and arrivals will be recalculated every day as sales and inventory movements are realized between now and when the promotion starts. And everybody sees how the plan is shifting over time at every location, right back to the supplier.

While there are other methods for shaping the flow plan (temporarily bypassing nodes with planned network flow changes, days of supply/safety time, etc.), simply having separate levers for demand shaping and supply plan shaping is a very effective way to plan not just promotions, but any other scenario where “decoupling and pushing” would be used outside of a Flowcasting context:

  • Cannibalization and halo effects on items that compete with or complement a promoted item
  • Planning for the initial pipeline and shelf filling, followed by ongoing replenishment for a new item
  • Pre-building stock ahead of a seasonal or holiday peak

Plan the execution, then execute the plan.

What could be simpler?

Empty Calories

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There is not any memory with less satisfaction than the memory of some temptation we resisted. – James Branch Cabell (1879-1958)

What are my current stock levels? What’s the status of my inbound orders? How were the weekend sales for my products?

A great deal of effort has been spent over the last 2 decades to provide this information to planners and decision makers in near real time. But how useful is it, really?

We like to call this the “salt, sugar and fat” of supply chain planning. It’s extremely satisfying to get answers to these questions in the moment, but the satiation wears off quickly and you find yourself asking the same questions a few days later.

These types of supply chain visibility metrics are merely a glimpse in the rearview mirror. The myriad activities that give rise to a particular inventory level, a change to an order status or a weekend sales result have already happened and have been happening for days, weeks or even months before the question was even asked.

It’s like sitting at the gate and your airline announces a departure delay. You would rather have that information than not, but if that’s all the information you get, you have no control over the outcome. All you know is that you won’t be getting to your destination on time.

Now, suppose that you’re a savvy traveller. Hours before you even leave for the airport, you check the tail number for the inbound flight. Then you check the origin city of that flight and a massive storm is rolling through right around the time it’s supposed to depart, virtually guaranteeing a significant delay.

What are you going to do? Try to get booked on a different airline whose inbound aircraft is not coming from the city that’s about to get pummelled? Extend your hotel stay for another night because there’s no way you’ll be getting out at a reasonable time? Rent a car and just make it a road trip instead? Or just suck it up and leave on your scheduled flight, even though you know you’re going to be significantly delayed.

Any of those options may be acceptable, depending on your needs and constraints (e.g. cost, how urgently you need to get to your destination, whether or not the distance is reasonably driveable). But you only have one option available if you didn’t see the problem coming and only learned about it when you were sitting at the gate.

The point here is that knowing where things currently sit is certainly useful, but nowhere near as useful as being able to anticipate what things will be like in the future. Constantly checking in on up-to-the-minute information about the very recent past may give you a sense of control, but in reality, you’re just sitting in the back seat bingeing on cheeseburgers and donuts.

In a supply chain context, focusing too much on “real time current” information can lead to false conclusions and bad decisions (or non-decisions).

You look at your current DC and store stock levels and everything looks nice and healthy, so you breathe a sigh of relief and move on to the next item. But a promotion is scheduled in 2 weeks that’s going to virtually wipe you out. And your lead time from the supplier is 4 weeks. This is an example of something that is a big problem, but it doesn’t look like a problem in the current data. The cost is lost sales that could have been avoided.

You move on to another item and you see that 30% of your stores are out of stock. So, you panic. You spend the morning trying to figure out how can this be? What happened? And you have a bunch of higher-ups (who are looking at the same “here and now” data that you are) asking the same questions. Meanwhile, an order was just triggered with the supplier that covers the shortfalls and is due to arrive in a few days. Within a week or so, all of the stores will be back in stock. This is an example of something that looks like a big problem in the current data, but really isn’t much of a problem at all. The cost is stress and lost productivity trying to solve a problem that has already been automatically solved.

Subsisting on a diet consisting mainly of salt, sugar and fat is not good for one’s long term health. So, how do you kick the habit?

Like the savvy air traveller, you need to give yourself a window into the future to know all of your options and make the best decisions in advance.

Properly cooked, an end-to-end planning process that is designed to always maintain a valid simulation of reality is a very tasty and nutritious vegetable.

Keep buggering on

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There are few people that have had such a profound impact on world history as Sir Winston Churchill. A personal hero of mine, Churchill was an inspirational statesman, writer, orator and leader who led Britain and her allies to victory in the Second World War.

Churchill was an enduring optimist, who believed in duty, hard work and a never say never attitude. In my humble opinion, it was his passion and total belief that ultimately freed Britain, and Europe, from the grip of the gestapo.

An accomplished writer and orator, he was renowned for many sayings that summarized his philosophy and outlook on things. One of these, was the phrase “keep buggering on” – a phrase used to encourage people to keep going, even when faced with overwhelming odds. Churchill believed that to achieve one’s goal, you need to “keep buggering on” – never giving in and continuing the journey until you reach your goal.

I’d like to share a true story of my colleague, Andre Martin, who – for roughly 50 years – has “kept buggering on” to realize his dream of a completely connected, seamlessly integrated supply chain from consumption to source; what we call Flowcasting.

To begin, let’s turn the clocks back to 1974. Andre has a huge problem on his hands as the Director of Manufacturing and Distribution at Abbott Labs in Montreal, Canada. He’s getting beat up about and trying to understand why the service levels in Similac (an infant nutritional product), and others, are dismal. They hover around 90% or so, but the target is 98%, or better. To make things worse, his manufacturing and distribution folks are at loggerheads and often in a fight.

Andre recalled a Jay Forrester article entitled “Industrial Dynamics” written in 1958 and decided what was needed was an inventory planning system that connects and manages 4 separate levels of inventory – their 10 regional DC’s supplied by a central DC, which was supplied by 3 factories which were supplied by multiple vendors.

About the same time a colleague recommended that he attend an Oliver Wight MRP seminar in Boston – which he did and where he met Oliver Wight. Soon after he would retain Oliver Wight in a consulting capacity. Andre would share his idea how he was thinking of planning production and synchronizing purchases with suppliers using the principles of MRP. Given that Abott had two more levels of inventory to manage, what Andre concluded was that he needed a four-level planning system that would integrate all levels.

Ollie liked the idea and agreed with the concept but informed Andre that no such software system existed in the market. To realize his design, he would need to develop it himself but could count on Ollie’s support and guidance should he choose to do so.

In fact, Oliver Wight informed Andre that he knew a person that could help develop the new software and introduced him to a young dude named Darryl Landvater. Two days later Darryl visited Montreal to work with Andre and began the journey to develop the very first integrated DRP/MRP solution – connecting distribution and manufacturing into an integrated system.

Once designed and implemented, the results were phenomenal! Service levels increased to 98-99% consistently, inventories were reduced at all levels by 25-60%, obsolescence was down by 60% and the cost of production fell by 15% as well.

Given the success of this initiative, Andre continued to think about seamlessly integrating any industrial supply chain. At the 1975 APICS conference in San Diego, California, he’d confirm his thinking. He had been pondering about an integrated supply chain driven from store-level to supplier using the principles of what they implemented at Abbott Labs. His breakthrough idea was that he flipped the MRP concept of a bill of material and instead created a bill of distribution – so the integrated supply chain could be driven by only one forecast.

At the conference he’d bump into and discuss this idea with the legendary Dr. Joseph Orlicky, the father of Material Requirements Planning (MRP) and a planning guru. Upon hearing Andre’s idea, Joe thought about it for a few minutes, then responded in a profound manner. “Andre”, he said, “your idea is sound, because you should never forecast what you can calculate.”

Not long after his success with Abott Labs and the DRP/MRP integration, Andre would join the Oliver Wight organization to help take DRP mainstream, including writing the seminal DRP book and later a book called “Infopartnering”. During his time at Oliver Wight, he would help lead the successful implementation of DRP with more than 40 companies – helping to cement the principles of DRP in distribution and manufacturing.

He then decided that the thinking should be taken to retail. To that end he would work with early retailers like Sears to help them implement DRP for their distribution operations, including early pilots of supplier scheduling in retail – i.e., sharing time-phased shipment projections with merchandise suppliers.

He would re-join forces with Darryl and create the Retail Pipeline Integration Group, focused on helping retailers embrace these concepts and drive their entire integrated supply chain from a forecast of consumer demand at the store level. They would help several retailers, including my team at Canadian Tire, and dabble in determining what was needed to build a retail focused solution capable of enabling Flowcasting – including how to process the massive volumes in retail and the retail specific planning challenges, like managing slow sellers as an example.

Based on their learning regarding a retail-focused solution during their initial prototypes and pilots, they would visit several large planning solution providers to convince them that a retail solution would be needed. All the major players declined to build one. So, given they were both committed to the cause, they decided to build a solution themselves. It’s a solution that has eventually found a home with the Oliver Wight Group – ironically the organization where the ideas, thinking and concepts of integrated planning largely originated.

In terms of the Flowcasting concept, early pilots and implementations have proved, beyond a shadow of a doubt, that Andre was correct in his initial thinking regarding an integrated supply chain. In retail, the entire supply chain for early adopters is driven by only a forecast of consumer demand and all other demands are calculated – providing all partners a model of the business and the ability to work in harmony using a single set of numbers.

Andre is retired now, but he still interacts with me and the original Flowcasting pioneers to share his wisdom and talk a little smack about hockey (btw, Andre, the Leafs are better than the Canadiens, at least for now).

I suppose that I’m now one of the ones that will continue to drive the thinking and adoption of the principles and concepts of Flowcasting. Which reminds me of another famous Churchill quote to help inspire us; “Never give in. Never, never, never, never—in nothing, great or small, large or petty.”

Don’t worry, we won’t, so when it comes to Flowcasting adoption…

We’ll “keep buggering on”.

Scaffolding

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It’s an early spring weekend, 1991. A cold and dreary day. Several of America’s sharpest young minds have gathered at a hotel near Detroit. After the students find their way to their seats and the event starts, the room would fall dead quiet. All eyes were fixated on the 8X8 rows of squares. It was the start of the National Junior High School Chess Championships.

The tournament was usually dominated by teams from fancy, elite schools. Most of them had the resources and desire to make chess part of the school curriculum. Dalton – an elite New York school – were the defending champs and had won three straight national championships. For students at Dalton, chess was part of student life.

At school, every kindergarten student took a chess class, and every 1st grade student studied the game for an entire year. As they did in subsequent years. The best players would receive additional lessons from some of the country’s best chess teachers. When it came to chess, Dalton was a powerhouse and the odds-on favorite to win again.

That year, another New York based school had entered the competition as a bit of an unknown wild card. They were the Raging Rooks – students representing a school hailing from Harlem. The Raging Rooks were a group of poor students of color, mostly living in neighborhoods dominated by drugs, violence, and crime.

No one gave the Raging Rooks a chance. As they walked nervously into the hotel, many heads turned. They had very little in common with their wealthy, elite opponents.

To everyone’s shock, the leading teams stumbled slightly, allowing the Raging Rooks to tie for first place. In under two years, the poor kids from Harlem had become national champions. The biggest surprise wasn’t that they had won – it’s why.

They won because they had had great scaffolding.

In construction, scaffolding is a temporary structure that allows workers to scale heights beyond their reach and work/build safely. Once the job is done, the support is removed. After that, the building stands on its own.

In learning, scaffolding serves a similar purpose. A teacher or coach offers initial instruction, knowledge and guidance, and then gradually removes the support. A key goal is to shift the responsibility to you, so you develop your own approach and methods to learning. That’s what Maurice Ashley – the coach of the Raging Rooks – did. He provided structures, coaching and guidance to give them the opportunity and motivation to learn and improve.

He would use unorthodox and creative ways to provide scaffolding to help the students not only learn but become very interested in chess, including self-learning and improvement. They would draw and use cartoons sometimes to highlight key moves and variations. Other times, they’d write stories about chess matches. They also wrote and recorded rap songs about the importance of central control of the chessboard.

As they became better and more of a team, the players started taking the motivation and opportunity to learn into their own hands. They would study and analyze each other’s games, with a goal for better understanding and learning. They didn’t care about being the smartest player in the room – they wanted to make the team smarter.

Another type of scaffolding is teaching others, with research showing teaching, tutoring or having to explain ideas and concepts boosts the tutor’s own learning. The oldest children appear to benefit from explaining to their younger siblings, for example.

As it turns out, scaffolding is crucial in learning and development, which was used extensively by Ashley to coach his chess team to a national title. It’s about aiding at the right time, gradually reducing support as the student learns and increases their competence. This approach not only fosters independence but also instills confidence, paving the way for individuals to harness their potential and improve their overall competence.

In my opinion, scaffolding is crucial for any business transformation – especially, as an example, for retailers who are moving to a holistic, integrated inventory planning approach like Flowcasting. The better the scaffolding, the better the implementation – both in the short-term and, importantly, the long term.

From experience, a coaching and support team that provides learning about the underlying principles and concepts of Flowcasting helps planners learn and understand. Not just the how, but the why. Flowcasting is not about the calculations (though, that’s important to learn as well). It’s about changing the working relationships amongst the entire retail eco-system participants, improving collaboration and working in harmony with a single set of numbers, driven by the heartbeat of the consumer. It’s about changing behaviors, and that kind of change needs to be supported by good scaffolding.

Ongoing coaching, including discussions and example walk-throughs regarding business scenarios and applying the principles/concepts helps to further ingrain new ways of thinking and working. The more a coaching and support team provides ongoing learning to the entire organization (including the merchants, suppliers and key service providers), the better. In short, the more scaffolding the better. In these kinds of transformations, the scaffolding is not temporary, like it is in construction. It needs to be enduring.

In my opinion, it’s so important that I would argue that the long-term success of a transformation to Flowcasting, or any other significant business transformation, can be determined by how well you answer this question…

How good is your scaffolding?

Think Inside the Box

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Flowcharts are standard tools for delivering projects. At an overall project level, it depicts, from left to right, what needs to be done and the rough sequence, with the project concluding when the goal is achieved in the final box on the right.

The goal is the box on the right. Every project, or change initiative, should begin by thoughtfully exploring what should go in that box. Some people call this “thinking from right to left”, and other people in various disciplines have used different language to describe what is fundamentally the same idea.

“Backcasting” is a term coined by University of Toronto Professor John B. Robinson to help in urban, environmental and energy planning. Backcasting starts by developing a detailed description of the desirable future state and then you work backwards to determine what needs to happen for that aspirational future state to become reality.

The key is detailed. The more detailed and specific you can articulate the desired future, the better.

Amazon founder Jeff Bezos is a Backcasting superstar and an inventor at heart. One of his brilliant inventions/innovations is the PR/FAQ document. His brainstormed idea was to make the traditional last step in a project, the first. To pitch a new project and have it embraced at Amazon, you need to write a PR/FAQ document – outlining the desired future state of the project, including the goal of the effort in the opening sentences of the press release.

The initial PR/FAQ document is shared with the leadership team, who meet and read the document in silence. Then they begin to provide input and feedback. People ask hard questions and engage in intense debate, discussing key ideas about the project, very focused on the goal and how it will help the customer.

The author of the PR/FAQ document then takes the feedback into account, revises the document and brings it back to the group. And this process unfolds again. And again. And again. Everything about the project is pressure tested and improved through multiple iterations. And the beautiful thing is that the concept that finally emerges is seen with equal clarity amongst the team and, importantly, everyone is on the same page from the start of the project.

Everything that happens after project approval is working backwards from the PR/FAQ – essentially backcasting from what’s in the box on the right.

The critical component of the approach is that the box on the right – the goal of the project/initiative or the desired future state – is a written narrative.

When you need to document your project using proper sentences and complete thoughts, it makes a significant difference to the quality of the idea/proposal. You can’t hide behind PowerPoint bullet points, and the thinking needs to be clear, concise and able to be understood by a critical team reading the document. This forces the project leader/team to think better. Getting people’s involvement and feedback through multiple iterations strengthens the narrative and helps to build commitment.

At Demand Clarity, when it comes to narratives, we’ve become Bezos disciples. We now use a 6-page written narrative for both our initial assessments of how well a retailer is in terms of planning and for outlining our future state recommendations – whereby we usually articulate how Flowcasting could work for the retail customer/client. The narrative approach has improved our thinking and the quality of the work we’ve delivered.

However, what’s inside the box on the right can also be used early during the project as a key change management mechanism for articulating the change and, more importantly, building commitment and ownership – especially amongst the senior leaders and sponsors.

The idea would be to document a future-dated PR/FAQ document to describe the end-state transformation to a Flowcasting-driven, integrated inventory flow planning process, whereby everyone in the extended eco-system was planning to a single set of numbers. The document should outline how the extended organization (including suppliers) would be working in the future and, importantly, contain quotes from all key stakeholders about the impact of the change. These quotes are building commitment for change.

This change-focused PR/FAQ document would be shared and referenced throughout the project teams and leadership/governance teams to help ensure people stay focused on the goal, understand the change and stay committed to the transformation. The written narrative about what’s in the box on the right becomes the rallying call for change.

I’m pretty sure you’ve heard the phrase “you need to think outside the box”. Sure, that’s good advice in many cases but to drive real, meaningful and lasting change you need to start by articulating, in detail, the desired change or future state.

You need to “think inside the box”.

The box on the right.