And it would not hurt the current supply chain planners either

I got the idea for this blog post after reading Shaun Snapp’s LinkedIn post on the topic of big data. In the post he correctly argues that the case for big data is sometimes exaggerated. Then in the comments section, he went on to explain how the lack of understanding of a particular problem can create the need for grand theories to solve the problem. Very often, this does not solve much. It is a very good post and I do recommend reading it.

This got me to thinking: What are some key things a supply chain planner should know so that they do not put too much effort in grand theories? I can think of five.

1. Future is uncertain:

It is a fact in general as well is in supply chains, while we can all forecast, calculate or plain old guess what is going to happen, there are no guarantees. It is possible to make a good use of the past data to understand the sale/demand/events that are very likely. But to confuse any of these predictions with any thinking that one has ‘figured it out’ is going to lead to trouble.

Instead, supply chain planners should embrace the uncertainty. They should count on your predictions being at least somewhat wrong and plan for it. They should create shock absorbers by way of safety buffers, be it inventory, capacity or other supplies. They should be more prepared by running what-if scenarios.

2. Calculation is different from Prediction:

It is often the case that we build models to represent the supply chain. These can be homegrown in Excel or something that you bought in the marketplace. Given the nature of computers, same input should result in same output. In fact, the fundamental math in supply chains typically involves very basic mathematical operations and as such is very easy. However, one should not confuse the ease of calculations with the ease of prediction. Calculations can be precise in a mathematical way, yet very inaccurate in terms of their predictive power. Supply chain planners should not confuse the precision in the calculation with accuracy of their prediction.

3. Planning is important; re-planning is key:

If one embraces the above mentioned idea of uncertainty, then one understands that all plans are likely to be wrong. Knowing the boundaries within which the current plan is still reliable and the ability to re-plan once those boundaries have been breached is a key concept for supply chain planners.

This helps both ways: It avoids extreme reactiveness or nervousness when the changes are minor and within the anticipated range. Yet, it provides a clear signal on when to re-plan when the changes are significant. Supply chain planners should learn to understand and clearly mark these boundaries.

4. Triangulation can be useful:

When planning, it is very important to do a sanity check of the final results. If you are going along developing your plan by one way of thinking, then come at it from a different angle and see if the results are still sensible. A very easy example of this is when sales representatives try to do their forecast. Considering total conscientious behavior, let’s assume that each has provided their best forecasts. When a planner looks at the combined input from a top-down angle, they might spot that the sum of the forecasts represents a change in the level of business that is simply not right.

Absent this top-down angle, this would be very difficult to spot. In the same way, a planner should learn to cross check their predictions through alternative lenses.

A very useful corollary of this is collaboration. Effective collaborative process executes some amount of triangulation before reaching a final answer. In this day and age, collaboration is key to success.

Supply chain planners are fox-like in their approach. They triangulate using various theories.

5. All things are not equal:

It seems that even in this day and age of long tails, the good old view that relatively few combinations account for most of the demand is still true (think Pareto principle). Likewise, only a relatively few combinations account for most of the errors in the plan as well. A good planner learns to use this idea to their benefit. Separating the ‘Vital-few from the trivial-many’, they focus themselves and their organizations on what is truly important.

Those are my top five principles for future supply chain planners. This is not to say that this is all it takes. Here are two other posts to read:

Think of the above five things as the basic principles to follow as a planner, while doing all the other required tasks and activities as the situation demands.

Those are my thoughts. Care to share yours? Please use the comments section.

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