Daily Archives: February 27, 2012

Apologies to the Faithful, but Optimized Planning is Good, not God!

Last Tuesday, Trevor Miles published a great post over on the the 21st Century Supply Chain blog on how Optimized Planning is Good, not God!. This cannot be understated. Too many companies think that a great plan is the key to unlock the treasure chest that contains the much sought-after savings. It’s the key alright, but you have to fit it in the lock if you want to unlock the treasure chest. And the only way one gets to fit the key in the lock is if one actually reaches the treasure chest, and this requires control. You see, this treasure chest of savings sits on a pedestal at the end of a dark and dangerous dungeon filled with traps, treacherous descents, and natural horrors at every turn. Think of every dungeon and tomb that Indiana Jones had to survive, put them all together, and add in a few dozen more traps and that’s the danger an organization has to evade on a daily basis if it wants to reach the treasurer chest.

As such, an organization requires a lot of control in the form of integrated monitoring and control. At every turn, an organization has to look ahead to see what traps may lie in its path, look back to see what creatures are coming up behind it, and be aware of the foundations crumbling beneath its plan and react quickly, and correctly. The reasons this are the case is simple — nothing every goes according to plan (even if you are the A-Team as you always have to deal with the unexpected wrench to complete the plan) and even if it did, the plan is never right anyway.

Consider the quoted study from Terra Technology that shows that an average forecast is typically no more than 52% accurate. This means that even if the supply forecast was perfect, it would still be, at most, 52% accurate. That’s why an organization has to continuously monitor the plan, and as soon as significant variances arise, respond by re-optimizing the plan. That’s the only way to reach the treasure chest of savings that optimization promises. Otherwise, the savings will never materialize as they were calculated with respect to a plan that was never executed.

So check out Trevor’s post over on the the 21st Century Supply Chain blog on how Optimized Planning is Good, not God!. It’s a great read!