Michael Jackson and Supply Chain Forecasting & Planning

Michael Jackson

Michael Jackson

We all know a strike, natural disaster, large scale power failure/ black out, major retail customer dropping you as a supplier, major competitor dropping out of the market, recall of a product due to contamination and more can have a major impact on your demand, for the worse and for the worse (yes, I said it twice).  For the worse #1, the demand for many of your products will take a nose dive, and you’re left with ageing stock without liquidity.  And for the worse #2, you experience shortages and stock-outs because of your inability to handle the sudden surge in demand, leading to loss of opportunity and possibly loss of customers for good.

Last week we lost one of the greatest entertainers, arguably, of all time, the “King of Pop,” Michael Jackson. Personally, this was very difficult to handle when my childhood was spent trying to dance and moonwalk to “Billy Jean” and “Thriller.”  I know I am not alone.  So don’t be afraid to admit it as you know who you are :).  Regardless of your personal opinions of Michael, his reach and world wide interest is indisputable.

Of course, resulting from this shocking news, we are now seeing an astronomical surge in demand for every item related to Michael Jackson, from books to dvd’s, cd’s, mp3’s, and even internet domain names with Michael Jackson as part of the name.  If you search “Michael Jackson domain” on ebay, you’ll see website domains selling for $1,000,000 (USD)+ (as of June 26, 2009).  You will not only find domains for sale such as inmemoryofmichaeljackson.org, but also  michaeljacksonwear.com for those who want to build an online store to sell replicas of Michael Jackson’s sequenced glove, or his red Thriller jacket, and more. I am always fascinated by the ingenuity and creativity of many opportunists who attempt to capitalize on the happenings in the world.

As a junk yard for car parts capitalize on automobile accidents for more business, there are many businesses that will benefit from the death of Michael Jackson.  Although, we are sure, many would not have wanted to gain new business this way. I don’t think they’re unhappy either, especially in this difficult economy for many.  It appears there are a scarce number of stores right now where you can find his cd’s, dvd’s, and books about his life, where I am sure prices are currently skyrocketing.  I also believe this is true for his classic clothing and other memorabilia. Of course, this is certainly an outlier as no one expected his death to come so prematurely?

Furthermore, as surprising as it seems, the electronic/ virtual supply chains or supply chains that package news and information as electronic data are also impacted by his death.  Who would have thought with cloud computing and the promise of near unlimited bandwidth, computer power,  and storage that google search, google news, AOL Instant Messenger, and twitter.com would fail for significant periods of time caused by the outpouring of people around the world sharing their emotions, feelings, and searching for Michael Jackson news through these platforms?  A quote from CNN, “How many people does it take to break the Internet? On June 25, we found out it’s just one – that one is Michael Jackson”  I also heard some one saying how funny it is when the real time web breaks news, but the news ends up breaking the web? Another FYI, when these platforms went down, many election protestors in Iran had no medium to share the brutal violence being faced by their own military?

In the States, the power companies handle a sudden jump in a cities temperature by buying more electricity from other locations and sending it to where needed.  Are we naïve to think that some of the behemoths of the internet, such as google don’t have this type of electronic supply chain flexibility, nor do they have proper risk management plans for handling this unforeseen surge in demand? If they didn’t before, I am sure they must be putting the pieces in place to have them now.  Google themselves said the number of queries for Michael Jackson was “Volcanic” and initially thought they were being attacked, which forced the site to automatically be shut down for the wrong reason. Personally, I hope our government is more proactive on potential risks to the country than the corporate world.

I bet that the companies that will truly benefit from this unexpected demand are the ones that have formal collaborative processes such as Sales & Operations Planning (S&OP) that can quickly gather input on what’s happening in the marketplace, sit together in one room, along with members of senior management, and work out a plan to take advantage of this challenge.  Of course, it must go hand in hand with an agile and more flexible supply chain to make it happen.  Plus, your demand planning & forecasting team must be efficiently running as well.

When I think of agile supply chains, one company that comes to my mind is the clothing company Zara.  Zara sells premium clothing to women as well as men.  Fashion products tend to have shorter life cycles with extremely selective customers, making forecasting and planning a major challenge. It’s almost like dealing with an “outlier” every day.  However, Zara has been heralded for being able to quickly incorporate the latest trends and fashion into clothing that can be on the racks in a matter of a few weeks, which is remarkable.

Therefore, the companies that can react to sudden changes in the marketplace and incorporate every major input into the decision making process, stands to fatten their bottom line quite well.

Again, personally, I would have preferred not to have written a post referring to Michael Jackson’s death.  Our heart filled condolences go out to his children and family during this difficult time. But, this ”phenomenon” has  a real impact on business and it cannot be ignored.
Can your business survive or greatly capitalize on a future “phenomenon”?

Your comments and experience are welcome

Anish Jain
Managing Director
Institute of Business Forecasting & Planning – IBF

6 Responses to Michael Jackson and Supply Chain Forecasting & Planning

  1. Hello Anish,

    Michael Jackson was a phenomenon in music and entertainment. He was a great entertainer and delivered great joy and enjoyment to many people of all ages around the world. (I still remember how much my children, my nieces, and their age peers enjoyed Thriller when it was released. It was a thriller in every sense of the word.) His death is a great loss, and he will be sorely missed for his great music and dancing, and for his many contributions to Pop Music.

    But not only was he a great entertainer, he was also a business and a business person. He was providing products and services that demanded savvy investors, long-range planning and forecasting, competent logistics professionals, well designed and executed financial and business plans, along with all of the talents involved in musical production and distribution. His untimely death was truly an outlier in expectations about the future, occuring at the very moment that his was getting ready to undertake a major program (the 50 event series in London) for which he was to be paid $1 million per performance. That is a cashflow stream that was planned to partially address a capitalization issue that he was facing – $400 million in debt combined with many high value but relatively illiquid assets. His business advisors and financial advisors were doing many of the same things that we are doing in our professional capacities for the companies for which we work – sales & operations planning, demand planning, demand forecasting, and supply chain management. So, his business situation and his business challenges may have been more similar to those of our business experiences than may necessarily be obvious at first. Like Apple where there is concern of its future if something were to happen to Steve Jobs, there is great trepidation about the future of the Michael Jackson music business enterprise and its future in his absence.

    Michael Jackson’s untimely death is a most unfortunate event, one in which his family and his many fans are experiencing grief and a deep sense of loss. While he was a business and business person, most importantly he was a person of great talent whose music and dance have delivered happy and joyful moments many. He will be greatly missed.

    Mark Lawless
    Managing Principal
    Marlaw Business Advisory Services

  2. I’ve never been a big fan of Michael nor of pop music in general. So I didn’t resonate nearly so strong as did zillions of people.

    I was saddened by Johnny Cash’s death and also Keith Moon and John Entwistle from the Who. Sandy Denny of the Fairport Convention left a huge void. The Boss will probably outlive me by decades, so that’s no problem, and ditto for Lucinda Williams who just may live forever. 🙂

    That said, I think some of Anish’s comments demonstrate the degree to which the world of entertainment and the world of business are becoming entwined. That, among a number of other things, are making business more complex and subject to increasing rates of change. Executive S&OP plays a role there, because it’s all about change. If things never changed, you wouldn’t need S&OP. However, in today’s world, I’d hate to try to run a medium to large business without it.

    Cheers,

    Tom Wallace

  3. Oh, Michael.

    This article, in my mind is really about business and the readiness of today’s supply chain to meet unexpected demand. Supply vs. Demand meets Risk vs. Opportunity.

    Michael’s death, because he was the “King of PoP” has brought the spotlight to a myriad of discussion from family issues to business issues, legal battles, media issues and in the twitter, facebook, networking age, his name will no doubt be typed/hyped more times than his famous “Thriller” record setting sales transactions.

    Are we really ever ready for something like this? Fame and media have created a new wave of demand where it was only among the completely devoted in the most recent of demand streams.

    I need to preface that I really respected MJ’s work and talent, and not being very big on the entertainment scene, was skeptical as I always am, about reports that are designed to just get attention/ratings, but having said ALL that (sorry) back to the main point of the article and my reply:

    All of the best demand planning models sum back to depend on two things… History and calculated risk. Safety stock is a function of calculated risk. We hold safety stock based on the cost of our risk of inventory position, value of the customer’s order base plus potential sales (promos?) and variability of true demand. We balance our value of service level and liability, while attempting to do the same with our partners to assist them in the same end. Above that, our risk tolerance, flexibility, creativity and ability to keep our view on the pulse of the immediate future determines our ability to meet sudden demand spikes.

    We are now in an economic phase where planning is more essential than ever and needs to take place even futher in advance. In the recent past, many a manufacturer was willing to take an inventory postiion for a good customer in good faith of the future business. Today, risk tolerance has become nearly Nil and in the process, many of us have eliminated the prospect of supplying the “opportunity”.

    So… what is the best reaction, when something phenomenal happens suddenly, unpredictably and on a large scale?

    IMHO the best reaction is proaction in the past. Manufacturers and retailers are bringing their inventories to the bare bones in an effort to revive stock prices and security. To this end, we are hurting the consumers, laborers, investors and the lifeblood of our economy. There is no opportunity where there is no risk.

    For those who are keeping risk in check, only agility can keep you afloat. Watch and plan for the opportunity. Put out the feelers to the real global economy = begins with the consumer whose attention is in the highest demand and their discretionary dollar evaporating. Be ready to turn on the dime.

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