Demand Planners – what do you see when you look at this graph?
A Disturbed Trend.
Category: Forecasting and Planning / IBP / S&OP
Risk Planning Survey Results
How do planners build risk assessment into our S&OP processes? Some tools might include a risk register, SWOT analysis, probability and impact matrix, a tornado diagram, modeling and simulation, probabilistic analysis, or expert judgement. Here are results from the survey we took in January 2023.
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Risk Planning for 2023
The sun just set on another year, a new year is dawning, and there are clouds on the horizon. Will these clouds turn into a storm? If so, how bad will it be?
Demand planners are used to forecast volatility, but there are also many elements of external risk that could significantly impact our businesses. Will the market continue toward a larger downturn? Will Covid surge again, or some other disease? Are the recent attacks on utilities in the Carolinas and in the Pacific Northwest the beginning of some larger threat to our infrastructure? What major cyber-attacks might we see in 2023? How will the price of oil and natural gas be impacted by the ongoing war in Ukraine?
We live in a world full of risk. If the COVID-19 pandemic taught us anything it should be that we cannot take current stability for granted.
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Reflections on Another Wild Year
Think back to the beginning of this year. Everything was still shutdown. We were waiting for the number of COVID-19 cases to drop off so things could start opening again. We hoped vaccines would get the pandemic under control and help boost economic growth so we could return to a normal way of life. Upwards of 20 million people were still unemployed, but consumer sentiment was up from an eight-year low in April 2020.
Then 2021 happened! And what a year it has been. Just think about some of the unexpected events we saw.
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Bicycling, and Planning Software??
What do long bicycle rides have in common with new planning software? Maybe not much except they are two things I’ve been spending a lot of time on lately.
I completed my first cycling century (100 miles) at the end of last month. It took a lot of dedicated training time to get ready for it. I’ve also been busy the past several months helping clients investigate new software for supply and demand planning and MRP. It takes a lot of work to find a good fit.
When you commit to an endurance sport like a cycling century or a marathon it is important to count the cost and prepare well before you start. If you don’t prepare adequately, you probably won’t be able to finish. Likewise, if you do not prepare well for your software selection, you may find yourself with a tool that does not get you over the metaphorical finish line of getting your planners out of Excel spreadsheets for planning.
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Phugoid Oscillations and Congested Ports
When I was studying for my Private Pilot certification, I learned about phugoid oscillations. Most airplanes that are disturbed from level flight will go through a series of diminishing oscillations until they reach level flight again (if no controls are moved and the trim isn’t changed).
An aircraft that will eventually stabilize itself from minor deviations has aerodynamic stability. Most aircraft are built to be aerodynamically stable. If the pilot stays hands off, the plane will right itself from minor deviations.
Supply Chain Oscillations
We may be seeing something akin to phugoid oscillations in the congestion at ports. Port congestion is peaking again in California and is also building on the east coast.[1] California port congestion last peaked in the first quarter. The congestion was eventually capped by vessel supply. As those vessels were delayed in their normal rounds, other temporary vessels have been added. Now there is another round of congestion building.
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Frozen Forecasts?
Should we have frozen forecasts? I’m not talking predicting cold weather or demand for French fries. I’m talking about the concept of having a horizon for which forecast changes are not allowed.
From time-to-time I hear the suggestion that “we should freeze forecasts and not allow any changes within current month” (or some other period). I advocate against this practice.
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What If We Forgot to Ask What If?
With Easter being last weekend, I thought of an old story about what happened after Jesus returned to Heaven. Some angels asked about the plan to continue his work on earth. What would happen if the few disciples he had trained failed to continue his work? Jesus said, “I have no plan B.”
I heard this story used to teach Christians the importance of evangelism. I’d like to apply it differently. My point today is if you are the all-knowing, almighty God, then you don’t need a plan B. The rest of us need to plan for uncertainty. We need Plan B, Plan C, Plan D, etc.
My wife says when you are watching a scary movie, to be alert when things seem resolved and there is nice music, because something bad is about to happen. Isn’t that kind of like how supply chain is?
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Tracking Error for Significance
Have you ever heard or made statements like these:
- “Our forecast error is down for the third month in a row, showing that our new stat models are working.”
- “I want to recognize Susan for having the lowest forecast error last month, Congratulations Susan!”
- “Forecast error went up for two months in a row, we need to retune the stat models.”
If so, you may want to rethink your credentials as a demand planner.
Demand planners specialize in using statistics to generate forecasts. But we often overlook the application of statistics to differentiate between common variation and assignable cause in the very metrics we use to measure accuracy. This may be an area where Demand Planners can learn something from Lean Six Sigma practitioners, and start using Process Behavior Charts to identify when a change in forecast accuracy is significant.
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Make-to-order or Make-to-stock? Part 2
My last blog introduced the factors to consider when determining whether an item should be Make-to-Order (MTO) or Make-to-Stock (MTS). This blog proposes a step-by-step process for evaluating those factors.
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