“No battle plan ever survives contact with the enemy.”
― Helmuth von Moltke the Elder

“You can always change you plan, but only if you have one.”
― Randy Pausch, The Last Lecture

“Even the best plans can change if there’s an accident.”
― Lemony Snicket, The Reptile Room

I recently read an article on LinkedIn that said if you have a contingency plan, you’ve already admitted failure.  I couldn’t disagree more.  Unless you are omniscient, there is no way things will go exactly as planned.  Only the All-Knowing One can have a plan that foresees every eventuality. The rest of us need a plan B.

 Alternate Routes

When I leave my house to go to a client’s site, I have a plan for how to get there. I’ve checked a map to see what is the best route.  I probably even have Google Maps running on my phone to give me turn-by-turn directions.  But I’ve also looked at the map for alternate routes.  If I come across a bad accident or unusual traffic, I can re-route to avoid it.  I have a fixed destination in mind, but how I get there changes as I react to circumstances beyond my control.

Just as I have a map to my destination, a well-run company will have a solid process to identify and resolve anticipated imbalances in demand and supply.  Many companies now have a formal process for Business Planning (IBP) or Sales and Operations Planning (S&OP). A good IBP or S&OP process will establish the overall plan and establish contingencies for anticipated changes in market dynamics.  The destination is known and some alternate paths are established.  But what happens when a customer, competitor, or supplier does something unexpected? The plan is broken and must be reworked.

The Fog

It is not only future events that might impact your plan.  It is unlikely that you will have complete knowledge of everything happening in your own business, much less what is happening in your competitors and in the market.   Others have written about “the fog of business,” building on the concept of the “fog of war.”  In war, generals who are making the decisions are often out of touch with what’s happening on the front line.  Not only don’t they know where the enemy is, they might not even know where their own units are.

Businesses experience the same kind of “fog” as military units do.  Actions by competitors and changes in market dynamics may not be knowable until they impact your execution.  Decision makers may not even have key information from your own company, such as current orders and inventory at key locations.

Good military intelligence reduces the fog of war by providing battlefield commanders with situational awareness of where their own assets are and where the enemy is. Likewise, a business needs accurate and current information on market factors and the company’s inventory, demand, and supply.   Large companies may have formal Control Tower processes and supporting software to provide situational awareness.  Smaller companies may rely on their Enterprise Resource Planning (ERP) system with input from Sales and Operations leads. Either way, you need an early warning system to alert you to unexpected obstacles or opportunities.

Ad-hoc Response

Most IBP and S&OP cycles are monthly.  However, the pace of your business probably doesn’t permit waiting for a monthly cycle to decide whether to seize an opportunity that suddenly opens.  Ad-hoc meetings will often be necessary to address unexpected opportunities or risks.

One might object, “we have supply planners who will react to the changes.”  And they should be able to overcome minor perturbations in supply or demand.  A good supply planner will always have an alternative ready.  However, the supply planner is usually motivated to avoid shortages at any cost.  If you goal is simply to ship as much product as possible, the supply planners often can act independently to maximize the available product.   However, if your objective is to maximize revenue or profit (aren’t you in business to make money?), then the decision may be bigger than your supply planners.  The decision process needs to include people who understand the impact on margins, cash flow, and customer relationships.

When ad-hoc meetings become necessary in reaction to a situation change, start with the plan from your S&OP or IBP process.  Then understand the current situation from your Control Tower or ERP system, with input from sales and operations.  Consider alternatives that resolve the imbalance. Then make the best decision to achieve the goals of your company.

Plan to be Nimble

The gist of this is being nimble enough to quickly overcome obstacles and seize unexpected opportunities.  Three things are necessary:

1) A clear objective supported by a strong plan (from IBP or S&OP);

2) Good situational awareness (from Control Tower or ERP with sales and operations input); and;

3) An ad-hoc process to react when unexpected obstacles or opportunities arise.

You are not perfect and your plan is not perfect. It never will be.  Therefore, you need to have a mechanism to adjust your plan in a timely manner in response to unexpected obstacles and opportunities.