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September 07, 2007

Sherman's Law

Richard J. Sherman, president of Gold & Domas Research, recently wrote an article for the Council of Supply Chain Management Professionals (CSCMP) quarterly magazine called "Why has CPFR failed to scale?"

Toward the end of the article, he revealed "Sherman's Law of Forecast Accuracy" (I like to call it the Myth of Large Numbers, but Sherman summed it up with superb succinctness and elegance):

"Sherman's Law of Forecast Accuracy states: Forecast accuracy improves in direct correlation to its distance from usefulness."

In the same article, he also states:

Knowing what the store will order is easy. For the most part, they will order the pack-out case quantity. The real challenge is determining, based on rate of sales, when the store will reorder.

André Martin, who pioneered the distribution resource planning (DRP) system, likes to call this "flowcasting." But even before he coined the term, Martin had always stated that the only point of uncertainty was at the point of sale and that all other requirements upstream can be calculated.

André is right! Manufacturers should stop trying to forecast what will be sold at each point of sale.

To read the article in its entirety, current CSCMP members can link to it directly by clicking here and logging in. To subscribe to CSCMP's quarterly magazine, click here. To become a full member of CSCMP (which inlcudes a complimentary subscription and access to loads of other resoureces and materials) click here.

September 05, 2007

Educate, Indoctrinate

“When I transfer my knowledge I teach, when I transfer my beliefs I indoctrinate.” - Arthur Danto

Well, the unofficial end to summer has come and gone and students are gearing back up to continue their education. But of all those students who take math, how many will become mathematicians? Of all the students who take creative writing, how many will become authors or poets? Of all those who take religious studies, how many will become priests, ministers, rabbis or imams?

As a young Montrealer in the 1960s, my good friend and colleague Andre Martin moved to Toronto, unable to speak a word of English. For years, he had to muddle his way through conversations by translating in his head between English and French. I asked him when he became fluent in English. He responded: “One day, I was counting something and I caught myself saying “one, two, three” instead of “un, deux, trois” in my head. That’s when I knew I was fluent in English.”

Being able to hear and speak a new language is one thing. Being able to THINK in that language is quite another.

According to Roy H. Williams:

“Remember: transformation happens experientially, not intellectually. We often receive instruction and agree, "I see what you're saying," but seldom do we actually do the thing we learned. We just agree with it in our minds. This is a problem.”
What’s at issue is the fact that it’s easier to change what people know (through education) than it is to change what they believe. Those who achieve greatness in any discipline do so not because they took the right courses in school, but because they decided to make it their life’s work. Education can often be a vital catalyst in changing beliefs, but it’s obviously insufficient on its own (otherwise everyone who passes a chemistry course would be on track for a Nobel Prize).

Everybody needs to be educated, that’s a given. But how do you move to the next step – indoctrinating your team with principles that change what they believe? Practicing what you preach in all aspects of your work is a great start.

If you’re like most supply chain managers, you report your on-time service level results at monthly meetings, stress the importance of being on time with some facts and figures and challenge everyone to think about how to do better next month. That’s education – transferring what you know.

But is being on time a “way of life” for you, your team or your organization? For example, if your meetings habitually start 5-10 minutes late while you wait for stragglers, then you’re demonstrating that being on time is not that important to you. Next time (and every time) you have a meeting, lock the door ONE SECOND after the scheduled start time and don’t let anyone in until the meeting’s over. That’s indoctrination – transferring what you believe.

How much do you hate inventory in your pipeline? Enough to ask a team to do what they can to tweak some replenishment variables? Or enough to schedule regular meetings with operational people from your top suppliers where you do nothing but brainstorm ideas for cutting time and cost out of the supply chain? Your actions are what reflect your true beliefs.

Daniel J. Boorstin said, "The greatest obstacle to discovery is not ignorance – it is the illusion of knowledge."

Your “illusion of knowledge” can only get you so far. To really make an impact, you need to genuinely believe in something with your whole heart – then indoctrinate everyone you meet with that belief.