Are You Using Stories To Your Advantage In Your Supply Chain Planning Process?

Humans love stories and learn best from examples. Behavior scientists have even given a name to this common practice: Narrative Bias. In simple terms, the human brains understands and retains facts much better if there is a story binding them together. This concept has been talked about by many authors in many different contexts and then there is this:

“Because suppose you eschew gossip and just say Mr. Smith is in love with his wife. Why that disposes the Smiths as a topic of conversation for the rest of their life, But suppose you say with a smile, that poor little Mrs. Smith thinks her husband is in love with her, he must be very clever, Why then you can enjoyably talk about the Smiths forever.”

- by Ogden Nash (I have it on good authority.)

The poet is recommending the inserting of a naughty narrative to make the Smiths more interesting as a topic of conversation! And in most cases, I suspect he is right.

My colleagues and I have attended many supply chain meetings where the decision process is weighed heavily by an anecdote or two. I do not have a statistic on it,

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The Emergence of Global Markets with Regional Characteristics

In preparation for the Supply Chain Insights Global Summit, Lora Cecere spoke with Sujit Singh, Chief Operating Officer of Arkieva, in an episode of Straight Talk with Supply Chain Insights.

With two to three podcast a week, Straight Talk is designed to benefit the supply chain leader that is on the go and wants to be in the know. This specific podcast in part of a larger series leading up to the Global Summit and discusses the future of supply chain, particularly as it relates to S&OP and their global impact. Below is a brief excerpt of their discussion.

Lora Cecere: As you look at the supply chain of the future what do you think it looks like in 2020 and 2025? Can you give us your view?

Sujit Singh: Well certainly I can try. When you say supply chain of the future I am glad you include 2025 because 2020 is not that far anymore.

The way I see the market place evolving is that the pressures we see today will continue to get more intense. They will increase in complexity. It is obvious that there will be an increase in risk in the supply chains of the world.

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Is Your S&OP Glass Half-Full Or Half-Empty?

I recently watched a TED talk video by Alison Ledgerwood on YouTube. In the video, Alison gives the example of her paper getting accepted for publication (positive news) and another one getting rejected for publication (negative news). She talks about how it takes longer to recover from (i.e., go back to being her normal self) a piece of negative news as compared to a piece of positive news. While she makes a lot of good points in the video (and I do recommend that you watch it), here is what stuck with me.

The glass-is-half-full (positive thinking) is the “gain frame”. When things are positioned this way, the listeners: Take a positive view of what you are describing Are able to switch to the loss frame when new information is presented The glass-is-half-empty (negative thinking) is the “loss frame”. When things are positioned this way, the listeners: Take a negative view of what you are describing Have difficulty switching to the gain frame when new information is presented

Further, she provided a simple example where users had to do simple math to convert from one frame to another. While the math was exactly the same, it took 11 seconds to

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The Future of Supply Chain and How to Prepare

In preparation for the Supply Chain Insights Global Summit, Lora Cecere spoke with Bram Desmet, Managing Director of Arkieva’s Channel Partner Solventure, in an episode of Straight Talk with Supply Chain Insights.

The Straight Talk podcasts are designed to benefit the supply chain leader that is on the go and wants to be in the know. During this podcast, Bram and Lora discuss the future of supply chains and integration. Below you will find a brief excerpt of their discussion.

Lora Cecere: What do you think supply chain 2020 or 2025 looks like and how do people prepare?

Bram Desmet: Well, if I need to start something or somewhere what strikes me the most, is that when I see companies and when I train executives, is the lack of integration in today’s supply chain. For instance, I do quite some training for a major retailer in Europe and it strikes me that I see that private label suppliers are stuffed with inventory. The Central DC is stuffed with inventory. Shops are stuffed with inventory. We all demand high service levels from one step to the next and for me a basic issue is that there seems to be a

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Using What-if Scenarios To Create A Dynamic S&OP Paradigm

Sales and Operations Planning (S&OP) is typically a monthly process. Through a series of detailed planning steps, and usually three meetings, companies define a plan to deal with what they think they can do to meet the demand given their supply and other constraints.

Invariably, things never go exactly to plan. If demand stays the course, supply does not. If supply is steady, demand could be going crazy. More than likely, the situation is mixed across different product lines, customers, etc. which creates the pressure to plan at a higher frequency. Many businesses respond by organizing mini-S&OP meetings on a weekly basis. I have even worked with a few companies that had two mini-S&OP meetings in a week; one on Monday and the other on Thursday (These examples were all in the CPG industry.) It seemed to me that in some cases, they would tweak the plan every day if they could!

So a couple questions arise:

What is the ideal frequency of the S&OP meeting? How should businesses respond within their S&OP process to an ever changing environment?

I suppose the right answer to both questions is: it depends. But, let me not hide behind that and share a

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Is Your S&OP Meeting Mostly About The Past And The Present?

Key Point: A Sales and Operation Planning (S&OP) meeting is a meeting to design the future course of a business. Yet, too many companies spend too much time talking about the past or the current period. I recommend using about 60-70% of the time discussing the future.

The (S&OP) process consists of a lot of leg work to support the three main meetings: Pre S&OP Demand, Pre S&OP Supply, and the S&OP meeting itself. (OK, some companies have a fourth one: The Executive S&OP meeting). The whole process is designed to allow a company to make the best possible plan for the future based on current estimates, as well as prepare for certain contingencies via what-if scenario planning. However, things do not always turn out this way.

I was in the S&OP meeting of a prospective client as an observer a few months ago. At the outset, I was introduced as the outside party and a remark was made to remind everyone to “behave themselves”. The meeting started quite serenely; an agenda for the next 90 minutes was presented by the coordinator and the next 20 minutes were spent discussing some of the key metrics over the last 3 months.

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Do You Use Coefficient Of Variation To Determine Forecastability?

Key Point: Coefficient of Variation is not a perfect measure of forecastability. However, if used properly, it can add value to a business’s forecasting process.

In the world of forecasting, one of the key questions to consider is the forecastability of a particular set of data. For example, a salesman might consistently be better at forecasting compared to his or her colleague. Is this because the data assigned to them is more forecastable, or is the salesman in question more skilled at forecasting?

One of the ways demand planners have tried to answer this question is through the use of a calculation called Coefficient of Variation (CV). Some people call it standardized or normalized standard deviation (StdDev). In layman’s terms, Coefficient of Variation is a measure of how closely grouped a particular data set is. The formula for CV is: CV = StdDev (σ) / Mean (µ).

In this blog post, I will shed some light on this particular measure and how to interpret it.

A key value of the CV is it adjusts for the differences in magnitude – it measures spread relative to magnitude.

Case 1: Mean = 50; StdDev = 01, CV = 01/50 = 0.02

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Eliminating Some Of The Safety Stock Mystery

In the simplest inventory situation, the only variability is in the quantity of demand for a single day. There is no trend up or down or seasonal effect. The demand today is independent of the demand for tomorrow. Additionally, we will assume replenishment time is zero. That is when we place an order for additional material it arrives immediately – sort of like we have a Star Trek transporter. However, we can only reorder every N days, where N might be 3, 4, 20, etc.

To calculate the safety stock required using the normal distribution, we need the following information.

Mean or average daily demand (M) The standard deviation (average variation) of daily demand (S) The number of days between reordering (N) The desired fill rate (F) – which is the probability all demand is met over N days is met from material in stock. In statistics this is the probability of success. Note failure, some demand occurs we cannot meet from inventory is called back order rate.

In this situation, safety stock is the amount of inventory we keep on hand above the average demand. Note the high the safety stock, the higher the probability of success (fill rate)

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Reporting Forecast Accuracy At Sales and Operations Planning Meetings

You have a favorite forecast accuracy metric(s) you’ve been practicing within the organization for a while, and now you think you are ready to bring it to the Sales and Operations Planning (S&OP) meeting as a Key Performance Indicator (KPI) of your demand planning process. But you are not sure exactly how to go about reporting forecast accuracy to the attendees. In this post, I will address this question.

As one of my clients Paul puts it: When it comes to metric reporting at S&OP, the key is to keep the metrics simple, show the trend(s) over time, and then be able to drill into the details so one can chase down the issues to improve the metric. To me there is a lot of wisdom in those words. Let us take his ideas one at a time.

Keep it simple: This is important because executives typically do not have an in-depth understanding of forecast accuracy metrics. Therefore, it is key to pick a metric that they can easily grasp and base decisions on. This is probably the reason metrics that report percent errors are very popular. From this point of view, Mean Absolute Percent Error (MAPE) is a good

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What Is OLAP And Why Should I Care About It?

On-Line Analytical Processing (OLAP) is a technology/tool that allows one to go beyond the fixed, two dimensional view found in spreadsheets or printed reports. While using OLAP, one has the ability to interactively explore multi-dimensional data.

For example, a newly appointed supply chain manager wants to understand production variability in a business where a product can be produced on more than one line at more than one plant. The standard view of production data can be found in a weekly total by product, but he would like to drill into the data further to see production by product and by plant.

The data shows that production variability at one plant is noticeably greater, so the next step is to drill further down into the data to see production by line at that plant. He notices significant variability with one product on a single line. To see if related products share this variability, he then looks at production by product family for each line.

Without utilizing an OLAP tool, the supply chain manager would have to ask someone to create a new report each time he wanted to see more detail or to expand the number of standard reports to include

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