Daily Archives: March 20, 2009

Why Some Companies are Being Dumb

A recent article in Strategy + Business attempted to address why some companies are making the wrong moves. Needless to say, after my recent dumb company and dead company series, it caught my attention.

According to the article, some of the reasons companies are making the wrong moves are:

  • Market Optimism
    They think they’re better off than their competitors and that the crisis will serve to elevate them by harming their competitors more.
  • Overestimating their Financial Strength
    They are not accelerating their cash generation and, more importantly, cash preservation efforts.
  • Pulling Back on M&A
    When now is the best time for strong and stable companies to snatch up struggling companies with innovative products.
  • Mistrust of Senior Executive Leadership
    A recent survey by Booz & Company in December of 2008 found that two out of every five respondents were skeptical of senior executive plans, which, of course, affects their ability to carry those plans out.

I don’t think it captures all of the reasons, from what I’ve seen and heard over the past few months, but it’s certainly an important set of mistakes to avoid.

Now That Your Demand Planning Strategy Is In Play, Improve It!

In our last post on the topic, we reviewed the story of how Linksys improved forecast accuracy at the SKU level by 350% with better demand planning, as told by Robert Bowman in Free The Enterprise! This emphasized the need to put a good demand plan in place and illustrated the importance of good demand planning strategies.

One key component of a demand planning strategy is a demand sensing strategy that will let you know when market conditions are varying from forecasted predictions in (near) real time, allowing you to update the forecast before you stock-out or, even worse, get stuck with thousands of units of obsolete inventory. The recent edition of the The VCF Report had a great article by Lora Cecere of AMR on Forecasting Recovery Strategies and Seven Ways to Sense Demand and Predict the Upturn that you should read to give you insight into how to tweak your demand sensing, and associated demand planning, strategies for best results.

Lora offered the following seven tips to help your company sense demand, and even predict the upturn, so that you can make timely decisions and reap the profits that will be yours for the taking, if you are ready.

  1. Make Better Use of Downstream Data from Retailers
    POS (Point-of-Sale) and inventory movement data can be used to shorten replenishment times.
  2. Implement VMI For Your Customers
    This will help you to better sense true demand and avoid stock-outs as you will have immediate access to channel wide data.
  3. Use Downstream Data from Distributors
    This will give you visibility into the reseller market and a better picture of overall demand.
  4. Move to Active Forecasting
    And update your forecasts weekly instead of monthly for short-life products and monthly instead of quarterly for longer-life products.
  5. Tap into Sales Contract Data
    This is critical for effective planning of make-to-order and configure-to-order supply chains.
  6. Actively Use Market Data
    Channel data and third-party data can be used to sense channel trends and predict when a certain product or service category is about to take off in the marketplace.
  7. Sense Service Requirements
    Link your demand-sensing activities with your strategic service management planning for better results.

For more details, see the article.