About 2,000 years ago, a young carpenter from Nazareth cured a blind man, allowing him to see for the first time in his life. By all rights, this feat should have made Him a hero in the eyes of any who had witnessed or heard about it.

One problem: He decided to perform this miracle on the Sabbath, a day of rest according to church law. As a result, He was vilified as a sinner by church leaders for performing work on the Sabbath day. But shouldn’t He have been praised for restoring the man’s sight?

Throughout the ages, people have spent a lot of time trying to formulate rules. Rules of behaviour, rules of government, rules of business, etc. And the reason behind the effort is noble enough: to try to make things clearer and simpler to understand.

However, the problem with rules is that they don’t always stand the test of time and they can be construed in many ways to serve different purposes. And when two people disagree on the interpretation of a rule, the inevitable result is more rules to clear up the situation.

So is life really simpler with more rules?

Consider the Pharisees mentioned earlier. According to the rules at the time, their actions were totally justified. But even though the rules of the church have changed over time, the principle used by Jesus (always try to help those in need) is as relevant and easy to interpret today as it was two millennia ago.

And that’s the real difference between rules and principles. Rules are designed to give specific answers to specific questions. When new situations arise that don’t fall into the current set of rules, the only choice is to create more rules.

Principles, on the other hand, give people general guidance on how to think about problems. They can even be applied to new scenarios that haven’t yet arisen.

From a business point of view, the inherent flexibility in being principles-based can be a huge advantage over rules-based competitors. And nowhere is that more true than in the supply chain area of the organization.

So, what are the characteristics of principles-based organizations?

From a People point of view, principles-based organizations spend far more time educating than training. Training is about showing people how to perform specific tasks. Education is about giving people a general frame of reference to solve problems themselves. Over time, a well educated person will significantly outperform a well trained person in virtually any discipline – including supply chain management.

From a Process point of view, principles-based organizations don’t analyze things to death or count on “the facts” to tell them how to make decisions. Did you need analysis or facts to determine that Jesus’ decision to cure the blind man was the right one, regardless of the rules? Business decisions are no different. More often than not, the right thing to do is obvious – so do it.

From a System point of view, principles-based organizations take a simpler approach. Systems are designed and built to aid people’s thinking, not replace it. A highly complex system with a trillion lines of code to manage the supply chain is a sure sign that an organization is putting its faith in rules, not principles.

Remember, rules are meant to be broken, but principles last forever.

"We don’t make the snowboard. We make it stronger. We don’t make the clothing. We make it brighter. We don’t make the helmet. We make it tougher.

At BASF, we don’t make a lot of the products you buy. We make a lot of the products you buy better. ®"

The point they are trying to make is that they provide the basic elements, without which a large number of the products we use today would be inferior. The value they bring is interwoven (sometimes literally!) in the finished goods that are made by other companies.

Flowcasting is a lot like that.

At first blush, people tend to want to pigeonhole a concept like Flowcasting into their current notions about how the supply chain operates. “It’s basically a different flavour of computer assisted ordering, right?” people will often ask us.

Just like there’s a lot more to BASF than chemicals, there’s a lot more to Flowcasting than replenishment.

Flowcasting doesn’t plan your promotions. It makes the execution of your promotions more successful.

No more separate sales planning, shipment planning and purchase planning. No more committing quantities and dates weeks in advance, then hoping for the best. With Flowcasting, you plan your sales uplift and additional merchandising requirements once at store level and let the supply chain plan (and replan) itself right through until the promotion is closed. Don’t believe us? Read Chapter 6.

Flowcasting doesn’t rebalance your categories. It makes category management, product transitions and planogram execution seamless.

No more cramming the DC with pipeline filling quantities that will hopefully make it to the stores over several weeks. No more guessing the impact of planogram resets and pushing stock to the stores. No more trapped inventory or massive markdowns because of bad transition timing.

Flowcasting is a forward looking planning process. It always has an up-to-date view of where your inventory is -and where it’s going to be - several months into the future. If a planogram is changing in 2 months, plug it in and let the calculation deliver the exact quantity required to support it to the exact stores that are affected at the exact time the planogram needs to be set up. If you’re transitioning a line, look in the planning system to see when store level inventories will be dropping to zero with no pricing changes. Don’t believe it’s possible? Read Chapters 7 & 8.

Flowcasting doesn’t manage your capacity. It makes your capacity constraints highly visible before they become a problem.

The Flowcasting process produces up-to-date projections of demand, supply and inventory at the most granular level (by item by day in units) for every location in the supply chain. Those projections include not just baseline increases, all known demand and supply influencers at the same level of granularity. Capacity planning is as simple as converting the units to cubic feet, pounds, pallets, picks, trailers labour hours, etc. and aggregating by facility, facility area or lane. Sound too good to be true? Read Chapter 10.

Flowcasting doesn’t solve all your supply chain problems. It makes solving your supply chain problems easier.

Here's a terrific little article I stumbled upon by J. Eric Wilson from TempurPedic, Inc. It's called My Dog Ate My Homework!! and it's an interesting narrative about how forecasters sometimes spend more time making excuses than they do making real improvements to their processes. Enjoy!

In NASCAR races, cars run counter-clockwise around an oval at speeds of 300km/h with typically 30+ drivers on the track at one time. Tens of thousands of die-hard fans show up for every race – and that’s just a fraction of the millions who watch on television.

High speed bullet trains, like Japan’s shinkansen, also travel at speeds in excess of 300km/h. They follow the landscape instead of a repetitive oval and carry hundreds of people at a time - but no fans, no merchandising and no television coverage.

What’s the deal? The train is faster, has a more challenging track and far more participants involved...

Obviously what’s missing is the element of surprise and danger. Each of the 30 drivers in a NASCAR race are working independently of each other. They all need to be anticipating the actions of all the other drivers.

To have a shot at winning, you need to follow close, lest you leave too much room for another driver to sneak in front of you. But not TOO close in case the guy you’re following slows down or veers unexpectedly.

Fans can expect to see a lot of bumping, tire smoking, brake squealing and spinning out – not to mention the occasional spectacular fiery crash...

...not unlike how many retailers run their supply chains.

Stores order goods independently based on their forecasts of what they think customers will buy.

The DC replenishers try to anticipate and respond to what they think the stores’ actions will be. They need to follow close behind to avoid excess inventory, but not too close that fill rate is compromised.

Suppliers generally bring up the rear trying to not only anticipate what the lead cars (customers and stores) will do, but also how those in the middle of the pack (DCs) will react.

Like a full field race at Talladega, the “every man for himself” mentality certainly brings its share of excitement to the lives of retail supply chain professionals.

In contrast, a bullet train relies on a single driver with hard linkages between the cars and a fixed track. The cars can still be inches apart at 300km/h, but without the risk of catastrophe.

Granted, this kind of predictability won’t get hearts racing or attract legions of spectators, but in many cases excitement and unpredictability are overrated.

Sometimes the most well run supply chain is also the most boring.

There are things known and there are things unknown, and in between are the doors of perception. - Aldous Huxley

As a professional in supply chain management you’ll always have lots of questions. How can we change this process? How can we improve that? Why does this happen? What’s the root cause of this? How can we get buy-in?

You have oodles of questions, but what you really need is answers. The solutions to your quandaries and quagmires.

But the world of potential solutions is a world of unopened doors.

Of course, one of the most popular doors is labeled “Best Practices”. Many supply chain professionals open this door regularly. The logic and reasoning seems solid. “What are other companies doing”? “What results have they achieved?” “Let’s just copy what everyone else is doing.”

And what do they find? In many cases they discover that best practices often lead to mediocrity. After you’ve taken the time to implement them, today’s best practices can quickly become yesterday’s solutions.

And while this fact can disappointing, it’s hardly surprising. After all, the notion that the way one organization is doing something can be magically transferred to another is a little silly. It completely ignores critical factors such as culture, current processes and people.

Furthermore, why would you strive to achieve what someone else (probably a competitor) is already doing? In this day and age, it may not be wise to assume that the rest of the world will stand still while you catch up.

Have you ever thought about opening new doors? Doors that seem silly to open. Doors you walk by everyday.

What about opening the kaleidoscope of doors from other industries, other disciplines, and even Mother Nature herself? Do you ever wonder what you might find behind those doors?

Henry Ford opened doors. He developed the production line by opening the door to a meat slaughter house and learning how people did their job, then passed their work onto the next person in line.

Fred Smith has also opened a few weird doors. He got the idea for FedEx by opening the door to how banks processed and moved paperwork throughout their network.

Steve Sanger is another example. He paved the way to massive cycle time reductions at General Mills by opening the doors to the pit crew at a NASCAR event.

Similarly, Southwest Airlines has spent numerous hours watching and studying the pit crews of the Indy 500 to help them improve the turnaround times for planes.

To find solutions, it seems like you need to open different doors.

So, how do you know what doors to open?

It’s straightforward really. To open doors from other industries, processes, products, or disciplines, ask the following questions:

• What are the attributes of the problem you’re trying to solve?
• What is the problem like?
• Who else has to deal with a similar type problem?
• How did they solve it?
• Could you adapt their solution to your situation?

Then do it.

The answer to your problem lies behind a door somewhere.

Which ones are you opening?

Click here for a fantastic series of articles in PDF format by Luke Tomkin of GRA (originally published in Logistics Magazine) - 14 pages of easy reading in all.

This gentleman obviously understands the Myth of Large Numbers.

A couple days ago, I did a Google search on the term “retail supply chain complexity”. An estimated 1.7 million results were returned.

Then I searched on “retail supply chain simplicity”: 321,000 results.

While this method is hardly scientific, it does tend to support the notion that there is a widespread belief that the retail supply chain is complex. (Quick side note: At the time of writing, 2 of the top 10 results on Google for the search term “retail supply chain simplicity” are related to Flowcasting. This may explain why some folks in the supply chain community think we’re off our nut.)

The perception that the retail supply chain is fraught with complication should come as no surprise to anyone who has read an industry publication in the last 10 years (as a case in point, I just received my February 2008 edition of Global Logistics & Supply Chain Strategies, the title of which is “Complexity Masters”).

But where does this perception come from? Is it justified or a red herring?

Ask a supply chain professional what makes the retail supply chain so difficult to manage and you’ll hear things like:

- thousands of stores
- tens of thousands of products
- hundreds – if not thousands – of suppliers

These things are true. However, all this does is explain why the retail supply chain is BIG.

Consider the U.S. Postal Service. They deliver 213 billion pieces of mail annually to over 146 million addresses and P.O. boxes in the U.S. using multiple modes of transport (including mules!). Something that big MUST be really complicated.

But when’s the last time you had a letter lost in the mail? According to the USPS 2007 annual report, on-time delivery reliability exceeded 96% (and it probably spikes even higher if you include letters that are a little bit late, but still made it to the destination).

Despite their size, the USPS (and any major postal service in a developed country for that matter) has made the CHOICE to keep things simple:

- a single price to mail a letter anywhere within the domestic network
- a geography based ZIP code system that can quickly route deliveries
- standardized way of filling in addresses on envelopes
- all of the automation opportunities that arise from keeping the PROCESS simple

Here’s another example. Ask yourself this question: when was the last time FedEx lost one of your shipments? Answer: probably never. Yet, FedEx runs a huge supply chain. They move 7.5 million shipments daily, through a network of over 1,400 stations utilizing 10 air hubs and 675+ aircraft flying into and out of 375 airports worldwide.

Their delivery performance? Consistently 99% on time!

All because FedEx’ founder Fred Smith conceived of a simple way to route shipments from point A to point B using a hub and spoke concept – at the time a counter-intuitive routing construct that worked like a dream. Because it was so simple.

The point I'm trying to make here is that if BIG = COMPLICATED, then there’s no way the USPS or FedEx should be able to achieve such high levels of performance.

Maybe there’s a lesson for those of us who work in the retail supply chain. We may one day stop being supply chain professionals, but we’ll always be retail customers.

Customers want products. The way POS data collection has evolved over the years, it’s actually fairly easy to figure out WHAT products they will want, WHERE they will buy them and WHEN. This is true whether you’re looking at 100 products in 10 stores or 100,000 products in 1,000 stores.

In retail, the size of the problem may be something that’s beyond your control, but complications will arise if you don’t consider the supply chain to be one tightly integrated process from the factory to the store shelf – and plan accordingly.

Size is a given in the retail supply chain, but complexity is a choice.

Before making your decision about where to shop, suppose you found out that Retailer A internally refers to you as a "consumer", while Retailer B calls you a "customer". Knowing nothing else about either of these companies, have you already formed an opinion about where you'd prefer to shop?

As supply chain folks, we all too often throw around the word "consumer" when talking about the final demand pull at the cash register, as if people were merely variables in a supply/demand equation or neatly summarized in a section of a pie graph.

I'm not one to judge others, here. If referring to customers as "consumers" was a crime, I'd be on America's Most Wanted by now. And yet we on the supply chain side of the retail business wonder why we always seem to be taking a back seat to the marketing department.

Maybe we deserve it.

As for me, I'm swearing off the word "consumer" cold turkey.

It’s interesting how a small mistranslation can drastically change the intended meaning of a word or phrase. While the result can often be humourous, that’s not always the case.

In 2005, a news report came out of China stating that they were going to put an end to pegging the renminbi (China’s domestic currency) against the U.S. dollar and instead allow it to float. This was a long awaited announcement that completely shocked the global currency markets sparking massive trades out of the U.S. dollar into Asian currencies.

Well, it turned out that this report was completely false. Apparently, the finance staff writers for The People’s Daily (China’s Communist party newspaper) had all taken the day off. So they left a novice writer in charge of filling in the white space for that day’s financial column. Not being a full time finance writer, she decided to comb through some recently published reports and analysis and cobble something together from that.

Her sources of information discussed, among other things, what might theoretically happen if the renminbi were allowed to float - and this is what she wrote in her column.

So what went wrong?

When the report was posted in English on the People’s Daily website, a minor mistranslation made it look as though the government had decided to revalue the currency and end pegging against the greenback. This being the information age, the news was picked up and zapped around the world in an instant. Without verifying the information, U.S. currency traders went into a selling frenzy. When the dust cleared, millions of dollars were lost – and all because of a mistranslation of an innocuous news article.

When you think about it, the same thing happens on a daily basis throughout the extended retail supply chain. We get so wrapped up in sharing information as quickly as possible that we sometimes forget to ask ourselves whether the information is useful and actionable to those whom we send it.

One example of this is the sharing of POS information between retailers and manufacturers. While it’s nice for the marketing departments to know how well products are being received by consumers, that’s pretty much all you get out of POS information.

Through various fairly recent initiatives, trading partners have tried to use aggregate POS and inventory data to try to plan the rest of the supply chain. The problem is that product flows from particular manufacturing plants through particular DCs and into particular stores. Each of these nodes has its own unique demand and supply characteristics.

By trying to solve such a problem in aggregate, you are left with a very poor translation of demand throughout the extended supply chain, achieved at a very high cost.

Flowcasting serves as a "universal translator", taking forecasts of true consumer demand at the point of consumption and automatically generating projections of inventory, shipping and resource needs all the way back to the manufacturing plant - in the language understood by each upstream supply chain partner.

Quick wins... Bang for the buck... Low hanging fruit... Whatever you call it, many business people have been conditioned to use a somewhat short-sighted approach for making change in their organizations.

It’s a natural human characteristic - we want the bottom-line benefits, but we also want to get them with minimal effort and risk. The problem with this approach is that you can often be sacrificing larger long term gains by taking a small immediate payout.

If you’re hungry right now and a single apple will suffice, then it’s okay to pick one from the bottom of the tree. But what if you’re counting on that tree to feed you for the entire season? Is continually picking the low hanging fruit a sensible and sustainable strategy?

According to Albert Pell of Pell's Citrus & Nursery in Osteen, Florida, "An inexperienced picker would pick the low hanging fruit first," Pell says. "But an experienced picker would know to start at the top."

The reason: starting low makes the picker's job harder, not easier. "If you're experienced, you rest the bag - which is around your neck and shoulders - on the ladder. You fill it as you go down, so it's full when you get to the bottom."

Even worse, picking the low hanging fruit first would mean taking underripe fruit and leaving ready-to-eat fruit on the tree. "The lower fruit would need to be picked last to give it more time to develop," says Eric Curry, a plant physiologist at the U.S. Department of Agriculture's Tree Fruit Research Laboratory in Wenatchee, Washington.

Joe Grant, a farm adviser at the University of California Cooperative Extension in Stockton, which offers research results and hands-on advice to California fruit growers, agrees. "When growers send pickers to the field, they don't advise them to pick the low-hanging fruit first," Grant says. "They tell them to pick what's ready to pick. And the first fruit to ripen is what's high up and well exposed to the sun."

In the realm of supply chain planning, most people find the instant gratification of low hanging fruit irresistible. But are you sure you’re not creating problems for yourself down the road?

To ensure that you’re maximizing your harvest from the long haul, you should take a lesson from the orchard operators – start at the top of the tree.

This means having the entire business process well thought out and documented - every step from the point of consumption, right back to the point of manufacture. Remember: the ultimate consumer bears all of the costs of the supply chain. The fact that most retail supply chains cut across several organizations can often make it easy to miss the forest through the trees.

For example, less frequent deliveries to stores may result in transportation savings, but how much more inventory will be carried at store level? How many sales will be lost as a result of stock outs? How much extra spoilage will result?

Should you abandon the "quick win" in all it's forms? No. But these short term opportunities need to be evaluated against the entire process for getting product into the customers’ hands. Otherwise, what may look like a great shortcut could turn out to be a serious long-term drain on your bottom line.

A well documented process map is a “living document” that can help you evaluate and communicate process change. Having helped numerous clients through this exercise, I can tell you that documenting your processes is very much like replacing your shag carpet with new Italian tile: It’s a lot of work – some of it fun and some not – but the result makes the whole thing worthwhile.

In the meantime, when someone suggests that picking the low hanging fruit is always the best strategy, you can at least tell them the truth about fruit farming!

In an earlier post we wrote that to get step-like improvements in performance, you need to dramatically change your process. Our example was the Fosbury Flop, the standard high jumping technique popularized by Dick Fosbury in the late 1960s.

Here’s a little something most folks don’t know about his innovation. Not long before he introduced the technique, the high jump landing areas were changed. Instead of jumpers landing in a sand pit, they would now land in a soft bag. Imagine trying the flop if you had to land in sand? Ouch!

The point is that sometimes outside changes facilitate new ways.

The same is true of Flowcasting. Recent advances in computing juice have made it possible to process the large volumes of data in retail.

According to André, there are three enemies to true cooperation and collaboration in the retail value chain.

First, “There is a deep misunderstanding about what truly drives the retail supply chain. Companies must address this first; otherwise they will continue to seek solutions that don’t apply. When people don’t understand a problem, they seek complicated solutions,” he says. “Once they understand the problem, they realize that the solution is really straightforward.” Martin points to the fact that even after decades and billions of dollars spent on complicated technologies, the retail ecosystem is still clogged with huge inventory levels and a persistently slow turn rate. According to the author, this fact alone should encourage decision makers to think differently.

The second enemy of true collaboration is unwillingness on the part of retailers to share information with their partners. “The pendulum swings between retailers who will only ‘sell it’ and those that empower manufacturers with infrastructure,” according to Martin. “Those retailers that put the infrastructure into place so that manufacturers can co-manage the supply chain with the retailer are winning.”

André cites unwillingness to work as a team as the third enemy.

Enemy #1 is the fundamental problem. Martin simply states, “The real driver of the supply chain is the consumer, plain and simple. But if we conducted a study asking retailers, wholesalers, and manufacturers what drives the supply chain, we’d get all sorts of different answers. Ultimately, it boils down to whether or not the consumer buys the product.” Although this might seem obvious, Martin discussed two recent examples where a manufacturer his company is working with lost millions on a new product promotion that didn’t go as planned. “The manufacturer spent a lot of money to create the demand, manufacture the product, and get it into position to be sold. Then they spent more money taking back the unsold inventory – all as a result of poor assumptions in the plan.”

So where does it go wrong? According to Martin, the answer is twofold: the wrong information is often used in forecasting demand in the first place, and there was not enough visibility into the entire chain to take quick corrective action when it was needed. By “the wrong information,” André means “aggregations,” and specifically, aggregations of demand data one or more levels up from where consumer demand is serviced- in the selling environment. “Aggregating hides inaccuracies, and it takes away your ability to look,” he says. Even for very well run retail companies, Factory2Shelf has been able to measure differences between DC-level demand forecasts and per-store forecasts of up to 15%. It is typically aggregated forecasts that are being shared with manufacturers, and the result is almost invariably an over-inventoried supply chain – to avoid the even more damaging problem of out-of-stocks.

Martin offers a different approach. The author advises, “Don’t forecast what you can calculate,” (perhaps borrowing the phrase from his years of involvement in DRP practices). Here’s how he explains it: a retailer typically generates both store-level and DC-level forecasts; the manufacturing partner will produce a forecast for its distribution network and another for its manufacturing plants. All four of these forecasts are performed independently of each other, using different units of measure (eaches, case pack, pallet, etc.) and often different time frames. At every step of the way, a different result is generated, and those differences create “friction” (inaccuracies that should be - but often aren’t - resolved). Martin suggests that if the retailer shared true demand data at the transactional level, that data could be used to calculate appropriate quantities at each point upstream in the supply chain. The result would be both better order quality and improved service levels, while reducing inventory in the pipeline. And to the extent that the data is made available daily, all the partners co-managing the chain can react to changing conditions at the store level.

If this sounds familiar, it’s because the problem is not new, as every retailer knows. I asked Martin how Factory2Shelf’s approach differs from or augments the VICS CPFR (“Collaborative Planning, Forecasting, and Replenishment”) process. Martin sees the “Flowcasting” process as taking CPFR to the next level by refining the current collaborative planning concept. He explains: “With CPFR, retailers share information about what they think they will sell with their manufacturing partners. The information is aggregated for all the stores supported by a retail DC. Manufacturers take on the responsibility to replenish the retail DC’s after the partners agree on service level and inventory turn objectives and on what each DC will require. This is an excellent start but, by aggregating to the DC level, the partners miss a key ingredient – what is happening on a store-by-store basis. Flowcasting uses unaggregated store-level demand data.”

Which is why Michael Mayoras, CEO of supply chain provider RedPrairie (www.redprairie.com), is excited about a recent trend that he has been seeing in his customer base, which includes retailers, consumer products manufacturers and distributors. They are moving to put in place processes and systems that would more closely link events "on the ground" in the retail center to what is taking place in real time back on the manufacturing shop floor. "Manufacturers are looking to understand what's happening now at the retail point of sale and then adjust their supply chains accordingly," Mayoras says.

Ten years ago, he continues, supply chain wasn't necessarily a part of that kind of conversation at a manufacturer. Marketing and merchandizing decisions remained siloed on the sales and marketing side of the business, while supply chain was left to handle the execution side. "There's more recognition now that supply chain has a very tight tie to how products are arranged and moved on the shelf," Mayoras says, "so supply chain is in the middle of all those conversations." Furthermore, companies are trying to figure out how to use their supply chain application assets to tie point-of-sale intelligence back to the plant so that they can better allocate the right mix of resources in a given shift, based on a given forecast or demand signal, and do that more accurately and more quickly than in the past.

Hmm...does that sound like Flowcasting, or what?

On January 11, 2008 Evan Schuman reported that…

Last year, retailers lost about $93 billion because customers couldn't get the products they expected, according to a study performed by RIS News and the IHL Group.

The report identified these as out-of-stocks but it used a rather expansive definition of out-of-stocks, including in-stock products that had an incorrect price as well as in-stock but misplaced product that neither the customer nor the associate could easily locate.

But IHL President Greg Buzek said the figures "did not factor in any increase for the holidays" and used September as a standard month. "So the figure in real life is about one and a half times this number," he said.

The report broke down the $93 billion as: can't find help (22.8 percent); price on product higher than the price from the ad or online (13.5 percent); associate can't find inventory (11.3 percent); empty shelves (28.7 percent); and customer "left for some other reason" (23.7 percent).

Another problem that Buzek found were global supply chain issues that prevented stores from getting adequate notice when merchandise delivery was going to be delayed. "They had no work in process inventory information until it hits the docks in China," Buzek said. "So they don't know it's late until it's too late."

We’re completely convinced that eventually Flowcasting will put a huge dent in this huge number…..for my wife’s sake, let’s hope so!

The only true demand in the retail supply chain is consumer demand at the retail shelf. Up until that point, inventory is being transferred from one place to another, adding cost but delivering no economic value to anyone. Upstream requirements are dependent on the demand of the consumer.

This seems self evident, and we have yet to find anyone who will flatly disagree with that statement. Yet many organizations continue to hold the belief that “If only my customers would give me their firm orders sooner, I’d be able to plan and execute more efficiently and with less inventory.”

Over the years, we’ve heard variations on this theme from many CPG manufacturing companies, lamenting the fact that their retail customers are constantly shifting their orders around and playing havoc with their relatively static production schedules. While this is a costly problem, simply using buffer time to shift the risk downstream is not really a solution – and over time it will actually make things worse.

Think about it. If everyone is simply trying to optimize their own piece of the retail supply chain puzzle by pushing their risk downstream, then wouldn’t the retail DC want to increase its lead time to the stores to improve order fill and inventory turns? After all, what’s good for the goose is good for the gander, right?

Now if the factories and DCs can "buffer their way to efficiency" by pushing all of their risk forward in the supply chain, then what is the retail store supposed to do? Insist that all of their customers place advance orders 48 hours before they plan to go shopping?

If increasing lead time is a valid way to gain efficiency, then it should apply across the entire supply chain – from the factory to the retail store. Obviously this is not the case, as – for the foreseeable future – retail stores will continue to experience demand from their customers with no advance warning whatsoever.

Let’s revisit our original premise – that the only true demand in the retail supply chain is consumer demand at the retail shelf. When you look at the supply chain in this light, then increasing buffer time does nothing but put more distance between the customer and everyone who’s trying to satisfy that customer.

Reduce uncertainty and you reduce your risk. Reduce your risk and you reduce the need to hedge the risk with buffers.

By creating a time-phased demand and supply plan that starts with the consumer and encompasses every node in the supply chain, it’s actually possible to reduce lead times AND buffer stocks for a more responsive and cost effective supply chain.

So when the tide goes out, you’ll have your swimsuit on.

Here’s to a prosperous 2008!