Sep 19, 2011 | Demand chains, Operations, Strategy
People routinely forecast optimistically, they under-forecast costs, and over-forecast outcomes. We have all seen it happen repeatedly in businesses and the public sector, most of us have seen it on personal level.
Demand planning is the core of effective operational optimisation, and differs from simply sales forecasting, in that it looks at the drivers of demand, rather than drivers of sales, often a big difference, and it is free of the bogy of just assuming the past will be repeated, even if massaged by some fancy algorithm.
Demand planning has been enhanced by the developments in what are in effect benchmarking of similar situations, collectively called Reference Class Forecasting by its Nobel prize winning proponents, Daniel Kahneman and Amos Tversky.
Demand planning is hard to do well, but most useful things are.
Aug 8, 2011 | Customers, Demand chains, Marketing, Small business
On Friday I made a very modest contribution to the proceedings of the Organic and Green trade show in Sydney. A bunch of committed, passionate people, working their collective butts off to build businesses that deliver on the organic promise to consumers.
The numbers however are daunting.
The Australian grocery trade is north of $106 Billion, the organic market, counting everything, (perhaps twice) with the most optimistic assumptions is $500 mill, including all the cosmetics, soaps, candles, recyclable bags, et al, many not included in the grocery figures, and probably constitutes 50% of the total. In other words, perhaps 1 in every 5,000 dollars spent in Australia on food is spent on organic food. How do you win in that arena?
Answer, one person at a time building a tribe, connecting them, giving them a reason to connect with others, supporting the ways they can connect, and working 20 years to be an overnight success.
Organic products are at what I believe to be a unique point in time, the confluence of two great social impacts.
The first is the tools to connect being given to us by the web 2.0.
The second is the sudden realisation that food matters more than as just fuel, that there is a powerful social and familial force present when you prepare and share good food, on top of the obvious benefits of the impact of healthy food on the individuals health.
Had you told me 3 years ago that a TV reality show would contribute to a major change in behavior, I would have told you to stop smoking illegal stuff, but perhaps the change was lurking, and Masterchef just provided the catalyst.
Jan 20, 2011 | Demand chains, Management, OE, Operations, Strategy
Some time ago I mused that perhaps the worm was slowing if not turning, in relation to local manufacturing, rather than buying in from China as the default option.
The crisis in the US, far worse than anything in this country, had to lead to structural change in the US economy, as the sort of structural change necessary usually only ever occurs when there is little option but to change, as continuing on is simply not an option.
It seems the swallows are appearing in the US, the early trendsetters are thinking twice about the downside of “offshoring”. Loss of IP control, sovereign risk, long and inflexible supply chains, transaction costs in the supply chain and management, and so on.
It makes economic and social sense to manufacture amongst the network of services and capabilities required to be sustainably successful, rather than taking the short term apparent cost reduction that really ends up costing more.
With China suffering increased inflationary pressure, their western export markets tightening wallets, an undervalued currency, and increasing domestic pressures around human rights, pollution, and the distribution of the new wealth, something has to break, somewhere. Wise businesses appear to be weighing the costs and benefits of offshoring, Vs building local capability, considering the long term benefits of development of clusters of innovation and service providers, and lean operations including shortened supply chains, and coming to the conclusion that some things are better done locally.
It will take a long time for the tide to turn, and it will turn very selectively, as many commodity, low value, low technology items will always be cheaper from a low cost environment, but the manufacturing that adds real value will start to trickle home.
Jan 18, 2011 | Customers, Demand chains, Marketing, Social Media
The retailer Patagonia has as a part of its corporate values a reverence for the environment, it is a core part of their corporate values, and highly relevant to their target market. They wear their hearts on their electronic sleeves by opening up their demand chain on all products to observation and criticism.
An integral part of their web presence is the Patagonia Footprint Chronicles site that provides some details the provenance of all their products with the opportunity for consumers to provide feedback.
This simple, transparent, exercise must be a source of huge value for the Patagonia brand, that targets high quality, and environmental sensitivity in everything they do. This sort of brand transparency is likely to become far more common as consumers increasingly demand facts rather than slogans from marketers, and marketers recognise the competitive value of demand chain transparency, enabled by the web 2.0.
Dec 20, 2010 | Demand chains, Leadership, Lean, OE, Operations, Strategy
The next time you hear an argument that justifies moving Australian manufacturing to a low cost country in order to compete, refer to this post on the Evolving Excellence blog describing the work practices in a Toyota’s Kyushu plant.
Labor is much more than a pair of hands doing a repetitive job, it is an opportunity to improve processes and identify and solve problems before they can impact on the customer, or even the next bay in the production line.
It may be hard to get to this point in Australia, but you will have no chance of making the changes necessary in a contract manufacturers plant in a “low cost” country. The accountants will generate their numbers, which can be pretty persuasive until you recognise that they do not account for the things that make a difference in the market, or count the wasted time, emotion and energy in their “productivity” calculations.
When an abundant country like Australia becomes a net importer of food, we have a real structural and strategic challenges in our demand chains that urgently need to be met, and the sooner we recognise the scale of it, and do a bit more than just mouth platitudes, the better.
Dec 4, 2010 | Change, Demand chains, Lean
busy bar
Last Friday night I was in a small local club with a client, co-incidentally as they had the weekly member “badge-draw” which had jackpotted to $19,000. As you can imagine the joint was packed, it took 20 minutes lining up just to get a beer.
What struck me, apart from thirst, were the inefficient “production” conditions behind the bar, resembling many factories I have seen, but in this case, the problems were easily diagnosed.
- There was extra staff to handle the anticipated crowd, and they were absolutely run off their feet, but achieving little of value to customers
- All the lines to the 4 bar stations were similarly packed, there was no “quicker” line. At first glance, the “line” was running at its maximum capacity.
- Expedition was rife, people would see their mates in line, and get them to place a bigger order, annoying all who had lined up, and slowing the whole process considerably.
- The key production point, the beer dispensers, were idle perhaps 85% of the time, (I did not measure it, thirst was getting the better of me) as staff took orders, juggled the tills and change, communicated with customers about which beer was which, the total of the bill, the slow service, and Aunty Fanny’s kidney stones, and did all the other stuff that created bottlenecks in front of the key “production” point.
In short, there was no “flow” at all, it was a mess, and the sales lost were enormous, as the 19K jackpot went off at the first draw, and the crowds thinned out immediately as they went home thirsty, and angry.
How easy would it have been to have one staff member pulling beers, and moving them to an “inventory” point for delivery to a thirsty waiting customer? Increasing the estimated 15% utilisation of the dispenser, would have removed the order backlog very quickly and easily, and would have removed a major source of customer irritation, increased sales, and reduced the obvious stress levels of staff.
Whilst only one person could win the 19k, everyone else would have been much happier!
