Written by Greg Spira
In one of my earlier posts, I stressed the point that eliminating Bias in the demand plan is critical to establish trust in it. Without trust, the plan is second-guessed or disregarded.
Acknowledging that point, however, does not give leadership much comfort when the demand plan falls short of business objectives. Providing visibility to that gap is a critical first step, but that leads us to the challenge: when we can see the gaps, what do we do about them?
If things are going well, gaps will become visible far enough in the future that we have time to solve them without worrying about our ability to supply. Just like we look at the long-range weather forecast before planning a trip to the beach – if there is rain in the forecast, we may choose a different day or a different activity. That’s first prize.
Things don’t always work out as planned. Sometimes we are faced with gaps to our objectives within our supply lead times. This is where I often hear people insist that go-get’s, plugs, or gap fillers be loaded into the demand plan. The thought is that without them, we will never be able to supply, and we don’t want to take ourselves out of the game prematurely.
Not wanting to give up on closing the gap is normal, and I would never suggest that a company not afford itself that decision. The problem is that it is not a decision that should be executed via the demand plan. It’s a decision that impacts the supply plan.
This is important for a few reasons:
- It reinforces the accountability with sales & marketing to have an unbiased, assumptions-based demand plan. If the demand plan is chronically low, then that behavior needs to be corrected at the source, and not masked with overlays.
- It makes the implications to inventory very transparent. Plugging the demand plan creates an optimistic view of both revenue and inventory, whereas adjusting the supply plan retains the integrity of demand and shows the most likely projection of inventory.
- It affords supply planners the flexibility to employ different strategies (flexible labour, postponement, etc.) to support the upside with the appropriate risk profile.
Stretch goals and go-gets are not always a bad thing – just make sure you’re planning for them the right way.