Fast food or slow food in your planning?
Since the growth of the obesity problems, lots of attention has been given to the slow food movement. The substantial growth of fast food has contributed a lot to obesity problems in developed countries. The same fastfood is new doing the same in emerging markets such as China and Nigeria, where obese childrens are one of the largest public health concerns. Enabled by a free market, fast logistics, and extensive marketing, fast food is outpacing the traditional slow (and more healthy) food.
Reading about this I could not help thinking about the advent of so-called “real-time planning” in supply chain management. Since already more than 5 years, the real-time phenomenon has gained ground in selling (advanced) planning software. Nowadays, with the presence of internet-enabled cell phones and social media, I expect that we will soon see a pacing up of selling effort. Being used to instantenous messaging and status updates, it is fairly easy for a marketer to tap into this feeling by jumping on the real-time planning bandwagon.
While real-time information sharing is not necessarily bad – at least it can provide a planner with a comfortable feeling that he has some information – real-time planning could actually be bad. As many of you know from playing the beer distribution game, forecast updating is one of the main contributors to the bullwhip effect. Essentially the mechanics boil down to updating more frequently than the system is able to respond. And actual responses take much longer than people think. Having outsourced manufacturing and a service level agreement that guarantees delivery within two weeks hides any potential delays further upstream the supply chain. Actual responses may therefore be much longer than your SLA suggests, especially in times of crisis. Our research shows that building in deliberate and well-designed slack into your planning mechanism eventually leads to a better performance. Some extra inventory here and there, some slack in your lead time, or some unused capacity may look bad on paper, but effectively this allows you to slow down your responses and create a balanced supply chain.
Real-time planning may lead to unanticipated obesity, while slow planning will keep you eventually much leaner.
Jan Fransoo, Professor at Eindhoven University of Technology, Faculty of Industrial Engineering and Innovation Sciences and Board Member of the European Supply Chain Forum.