Variability is the New Normal: Supply Chain Planning for the Real World

By Roger Fleury

When it comes to supply chain planning, there are often two sides to the proverbial coin:

  • What we want to happen with forecasts and recommendations and careful planning; and
  • What actually happens when the forecasts make it to the operations floor.

Unfortunately, it’s far too common for traditional material requirements planning (MRP) systems to be inflexible. The long-term forecasts that are planned out so carefully (often by an internal committee) end up being ignored by planners and schedulers because they are no longer relevant.

This flexibility is needed now more than ever as the world copes with the ongoing novel coronavirus pandemic, COVID-19.

How can we create more flexibility in our MRP systems to be able to quickly produce, scale, and meet demand in the changing “new normal”?

How can our supply chains create less waste, less stock, shorter lead times, higher customer service OTIF, and better staff morale?

How can we operate a system that reacts to real-world customer demand whilst allowing company-specific rules to be incorporated?

There is an answer: demand planning, also known as the Demand Driven Operating Model (DDOM). While a DDOM can affect all areas of an organization, we can start to achieve it by revamping the traditional MRP process to become a demand-driven model — DDMRP.

There’s just one problem: often, businesses have challenges implementing DDMRP. While DDMRP provides a better way of doing things, an organization needs to get to the point where they can gain the benefits of it. Let’s look at why these roadblocks occur and how to move past them to drive better results, sooner.

Why DDMRP Matters Now More Than Ever

Variability is at an all-time high. In fact, it feels inadequate to call it “variability.” We’ve all experienced massive shocks to our businesses, the economy, and our lifestyles in 2020 thus far.

The truth is that we don’t know what the world will look like in three months right now, let alone three years. Variability is the new normal and ignoring it is unacceptable.

Yet how can we forecast when the future is so unknown?

A demand-driven model achieves this – both in the short-term and the long-term.

This crisis has shone a spotlight on the weaknesses of certain businesses’ supply chains and the assumptions that drive them. The one variable that can be changed the quickest is management assumptions — self-imposed restrictions that you put on yourself. Those can be changed overnight.

Operating the way you are because you’ve always done it that way is never a good excuse. Nobody is suggesting that you ditch your existing suppliers just for the sake of it. But with the demand-driven mindset, you can find efficiencies with existing suppliers and in your own planning process to create a more agile business.

Demand-driven is more than just an inventory tool. It addresses a whole suite of fundamental issues about the way a business organizes itself to satisfy the customer.

Getting Into the Demand-Driven Mindset

The critical thing for any organization looking to engage in demand planning is to understand that demand-driven, for most people at the moment, requires a mindset change to appreciate the different approach.

On the educational side, this mindset shift can be accelerated with programs, such as the two-day Demand Driven Planner course.

On the less formal side, we have sessions that are nonetheless just as useful, like DDBRIX.

We can also provide software training, pilot programs, change management support, and more to help organizations put demand-driven operating into place.

However, we also must remember that education needs to be constant as staff members change. Until demand planning is taught widely in schools, taking it on as an organization means committing to continual learning for new team members — and existing ones as well.

To that end, the second part of the mindset shift involves working not only with members of the planning team, but also communicating with other departments.

Let’s take the finance department, for example.

Most financial teams will be focused on the unit price of inventory, which in turn often leads to buying in bulk. However, buying in bulk is only cheaper until you’re left with a pile of unused inventory. And it’s contrary to the mindset of flow.

In order to truly implement DDMRP, the financial team needs to understand that a slightly higher unit price upfront will be offset and even out in the end. Again, training such as a DDBRIX workshop or a webinar can help build this mindset.

Production capacity, distribution networks, warehouse capacity, inventory investments… All of these would change when you look at it from a demand-driven perspective. But the reason for that is the demand-driven methodology makes sense.

The Short-Term and Long-Term of DDMRP

In the short-term, demand-driven planning allows us to drive inventory reduction while maintaining customer service.

Then there are further gains over the long-term — the gains of having reduced lead times. Of having agility in your business. Of taking on less risk.

In some cases, businesses view a demand-driven model as riskier. If you think that exploring the demand-driven methodology is risky, then let me ask you this – how risky is placing a whole season’s supplies on order overseas months before the start of the season?

We’ve seen reports of apparel manufacturers, for example, now having to repurpose the 2020 spring collection for spring 2021 because they have so much unused inventory. With DDMRP, while this may not be avoided entirely, it would very likely be reduced.

How risky is continuing to do things the same way?

Nobody is saying that moving to demand-driven is easy and it’s going to be done and dusted in three months, but you can certainly step into the new methodology in that time. And the sooner you do, the more benefits you will reap.

Whether demand is surging or flatlining right now, you need a way to plan efficiently and effectively — and that allows you to rapidly adjust for the future.

On Thursday, May 21, I am hosting a webinar about moving to a demand-driven supply chain: Real World Supply Chain Planning with DDMRP. It’s happening at 11:30 a.m. EST (4:30 p.m. BST) online — 100% remotely.

I’d love for you to join me in exploring what the demand-driven methodology is and how to successfully implement it in your organization.

I’ll be talking more in-depth about the practical processes, set up, system integrations and I’ll be answering any questions that you have.

See details and register here:

Can’t make the webinar? No problem — we’re still here for you. At SHEA Global, we’re experts in DDMRP implementation and can help your business adapt to these unprecedented times. Contact us for more information.