Christmas was a month ago now. For many manufacturers, Christmas is like the turn of a page. Before Christmas, there was the seasonal rush, the fight to get as much of the right products out of the door and on to the shelves as fast possible. In spite of the doom and gloom stories about the economy the seasonal rush seemed more or less as strong as ever; still a large market to keep a share of, the same demand patterns, and the need for performance is still felt.
So, after Christmas, then what? The sales were on! Embarrassingly bloated inventories of those products which did not quite make it into shoppers’ hands, orphaned in the vast and complex distribution chains, now need to go! There are some real bargains to be had. With a combination of some very poor weather here in the UK just before Christmas plus a good dose of some seasonal sniffles, my own Christmas preparation was less than optimal. I then felt like a real “scrooge” going out after Christmas to take advantage buying up things I don’t need, at prices that make you wonder how their business can survive…. But it was fun!
Of course, this is quite a normal pattern for many people. It is a volatile time of year. Get it right, the numbers for the whole year are made, get it wrong and it can bring a company some serious issues. This process is hard on manufacturing. The ability to respond to “boom and bust” cycles stretches the abilities to maintain efficiency and quality as well as the on-time delivery.
Is this only however a problem of seasonality? No, actually this problem happens all the time, of course it is very noticeable when there are seasonal variations, but also when products come towards end of life. At product end of life, the regular distribution chain management systems really fall down. As demand for the product decreases, the value of each product falls, potentially rapidly, which causes the value of remaining stock in the distribution chain to fall. The sales forecasts become little more than prophesies, exhibiting repeating cycles of “boom” or “bust”, switching between the fear of significant stock write-off versus not enough product to fulfil the remaining customer demand.
So what? Now is time to think – about planning (or the lack of it!), efficiency, performance, what lessons have been learned, how to deal with the extreme fluctuations in demand and the balance of demand over different products. How to be agile, to respond to the market needs, but how to be also efficient, a lean operation with minimum waste?
It would be great to see the natural reduction of demand, which is in reality what is happening “at the tills”. What is preventing this visibility is the logic in the distribution chain systems that do not cope well in such cases, especially where the lead time from manufacturing to shelf has been continuously reduced in recent years in order to, ironically, increase agility and reduce stock in the distribution chain.
Time to think out of the box!
What can we do that is different? Back to the basics – “eliminate the unexpected”. We can always expect there to be fluctuations in product demand. What we don’t know is what the fluctuation is going to really be. Suggestion: improve the way in which the real demand pattern is communicated to manufacturing. Instead of sticking the numbers into a 1970s-logic-based distribution management system, give manufacturing direct visibility of the real demand pattern. This is beginning to sound familiar. Isn’t this the same “pull system” logic that we use in our Valor MSS Lean Materials Management solution? Let’s think about applying the same “Lean-Thinking” concept to real demand-based planning for manufacturing. Does anyone else out there see the potential in this?