As Halloween approaches, it’s the perfect time to reflect on some of the eerie missteps that can plague supply chain planning. Like ghosts lurking in the attic, certain habits and practices can jump out when you least expect them and wreak havoc on your operation.
In this blog, we’ll explore five common mistakes that might come back to haunt you, inflicting frightful consequences on your supply chain.
1. Going With Your Gut
Instinct is powerful. Once upon a time, it was a primary driver of what kept humans alive instead of becoming a sabertooth tiger’s next meal. Going with your gut still has its place…just not in supply chain planning.
Instinct is anecdote and memory driven. In a supply chain planning context, that often equates to “intuiting” the problem you’re trying to solve. Sometimes you might get lucky—it’s an issue you recognize from the past, and you have just the right solution. But, more often, you might find you’re reacting to an issue that was addressed six months ago, that the “issue” is actually just a symptom of the real problem, or that the problem doesn’t exist at all.
The solution is simple: follow the data. We live in a world where there’s more data than ever available. If you base your supply chain planning on that data, you’ll keep the threat of instinct-driven decisions from haunting your operation.
2. Firefighting Instead of Planning
It’s hard to ignore an immediate crisis. An order is late, and your best customer is desperate to receive it. You’re typically focused on planning, but it’s time to take the initiative, drop everything and take care of this ASAP! Right?
Wrong.
Although you might get a nice pat on the back for solving today’s problem, as a supply chain planner, you should be concerned with tomorrow’s problems. Putting out fires is someone else’s job. (If it’s not, it should be!) Your job is to examine the data behind incidents like today’s shipment snafu, understand how and why it occurred, and take steps to prevent it from happening again. Resist the urge to be a firefighter. Focus on preparing your organization for the future.
3. Living in the Past
Making data-driven decisions is important (see haunting mistake #1). But it’s easy to fall into the trap of spending too much time and energy analyzing what has happened instead of considering what will happen. Past is prologue, and it forms the foundation of your planning, but don’t get stuck in it. Obsessing about what happened in the past is no way to plan for the future.
In supply chain planning, history seldom repeats itself – but it does rhyme. In other words, the future isn’t going to be an exact replica of the past. Historical data should be used to heighten your awareness of future possibilities so that you can create broader plans and strategies that anticipate and mitigate related issues that help silence that echo.
4. Chasing Absolute Precision
Just as perfection is the enemy of progress, the quest for absolute precision can be the downfall of successful supply chain planning. Making a day-by-day plan for the entire year might sound like an airtight strategy for supply chain perfection but, in reality, doing so accurately simply isn’t viable. Typically, near-term forecasts – say, one month out – have a 15-30% margin of error. Once you get to 10 months out, it’s more like 40-50%. Forecast accuracy decays over time.
Planning too precisely and too far out is a waste of time and resources. It might be nice to know that your predictions turn out to be correct from time to time, but that’s beside the point. Even a broken clock is right twice a day. Chasing precision above all else actually makes you less prepared for the uncertainty of the future. It’s better to be roughly right than precisely wrong.
5. Valuing Accuracy Over Usefulness
Making accurate high-level forecasts can be fairly tempting. Let’s say you accurately predict that the company is going to make $100.3 million next month. From a supply chain planning angle, what you really needed to know is which products to build, which inventories to adjust, and which customers to ship to. Although your accurate, high-level prediction might be great for your ego, it’s not useful in the supply chain.
Don’t waste time and effort chasing accuracy by focusing on the wrong metrics. As a supply chain planner, your job is to provide useful information to the organization – the nuts and bolts of the operation. Prioritizing high-level accuracy over practical supply chain specifics is a surefire recipe for unpreparedness.
Avoid the Chilling Consequences With Common Sense Planning
Effective supply chain planning is about preparing for possibilities rather than becoming fixated on a specific number or situation. Consider the “what if?” scenarios around those possibilities – the loss of a key customer or the shutdown of a supplier, for instance. And keep an eye on current events, like the news leading up to the recent East Coast port labor strike. Contemplate all these potential disruptions and use your data to run the numbers and simulate those scenarios before they happen so you’re more prepared when and if they actually do.
The most haunting mistakes supply chain planners make are the result of the inherent uncertainty of the future and the frustrating impossibility of calculating the effects of that uncertainty. Let data and smarter decisions be the flashlight that reveals and helps you avoid the potential jump scares of supply chain planning.
