I am a big fan of a ubiquitous fast food restaurant called Chipotle. Black beans, brown rice, grilled chicken, both habanero salsa and pico de gallo, cheese on a whim, but no lettuce, and definitely no sour cream. Chances are that your favorite assembly is different than mine, yet Chipotle seems to always handle the vagaries of ingredient demand. Better yet, the ingredient seems to be freshly prepared just at the right time. So how do they do it?
During the past two years in the W.P. Carey’s MBA program, I learned several elements of building an operations model in the supply chain. We learn about concepts such as bullwhip effect down the supply chain, lead time, maintaining a safety stock, and even the batch size and frequency of ordering systems… it can all be related back to how Chipotle does its business. With an MBA degree specializing in Supply Chain Management, it is fun to see that when the steak inventory is low, an employee gets right to cooking new steak (safety stock and lead time!), and that each ingredient bin size is different (batch size!), such as that lettuce and cheese bins are bigger than the corn, though you get roughly the same amount of each ingredient when ordered. Yet there is one piece missing– the base demand level that can vary between 100 and 1,000 customers per day. Some of the most efficient supply chain systems out there ignore the fact that it depends on reliable forecasting to plan its business.
I recently had the chance to explore the world of forecasting and operations planning at the annual Supply Chain Forecasting & Planning Conference held in Scottsdale, Arizona USA. This is hosted by the Institute of Business Forecasting & Planning (IBF), and was fortunately local for W.P. Carey students. For MBA students, industry conferences are an excellent way to fortify concepts and real-world applications, and one of the best ways to network with relevant people in the discipline. Another big advantage of an industry conference is the access to hiring managers– at this conference alone, I was able to secure on-the-spot job interviews with the actual hiring decision makers, including one with a senior director at The Coca-Cola Company.
The first of the 3-day event was an all-day crash tutorial of the forecasting and sales and operations planning (S&OP) process. There were basic statistics involved, such as the univariate time series, linear regression, and trend lines, which refreshed the W.P. Carey core curriculum, and also infused new topics such as different types of error analysis, functional bias, and types of forecast models and strategies. In summary, the IBF conference helped me understand two things:
- For any business operations to be successful, demand forecasting (“what customers want”) must be linked with demand & supply planning (“what you can make”).
- The “one number” achievement in forecasting demand. Each department uses a different KPI and have different bias that results in different demand outlook. Generally, marketing and sales will have sky high hopes for the next year, while manufacturing knows that the production level is impossible. What to do? A successful organization must facilitate this to close these gaps and work towards a single number.
Second and third days of the IBF conference were composed of seminars on the real world applications. They were fascinating and informative, but most of all benefited me by being able to speak the industry’s up-to-date language. Here are just some of the sessions I attended:
“Nike’s Implementation of an S&OP Process”, presented by Nike iD
“Differentiated Forecast Strategy”, presented by DuPont
“Forecast Improvement in a Complex Medical Technology Environment”, by Medtronics
“Developing a Formal S&OP Process”, by Entrematic, Sectional Doors of America
“Segmented Service Levels Based on Forecast Accuracy”, by Coca-Cola
“Demand Management for Food & Beverage”, by Organic Valley
“Cargill Animal Nutrition and their Collaborative S&OP Journey”, by Cargill
The wealth of knowledge was incredible, and I could probably dedicate a long-form paper on the concept and applications from these seminars alone! Taking the very first seminar of the conference as an example, when Nike iD first launched its made-to-order custom shoe business in early 2000’s, it had little insight over future demand (“blind buy” operations). Also, there are thousands of variations of custom shoes that added to the Nike ID’s expensive sticker price. I won’t spoil the surprise for you, but Nike employed a series of metrics, both common and uncommon, to improve its forecasting.
Also taking the very last seminar of the conference as an example, Organic Valley improved its milk supply chain by building a tiered planning process and software implementation to account for variations in lead time and promotional lift on this classic price-sensitive staple good. Hearing about how the company made cost savings by tackling these challenges of various lead time, production, demand, and short-shelf life, left a strong impression on how I would view my own organization’s strategic approach in the future.
For any incoming or current MBA student, I strongly recommend attending an industry conference. The Phoenix metropolitan area happens to be blessed with industry conferences, probably due to the amazingly fine weather, and students are often given discounts and ambassador opportunities to be a part of it. Needless to say, I thoroughly enjoyed the IBF’s conference and would recommend it to anyone.
Interested in learning how to support the IBF’s series of conferences? They are always looking for students, as well as practitioner volunteers, to blog, tweet, be a runner, and support the overall event onsite. Benefits include attending the conference, luncheons, and incredible networking with industry professionals. Contact Stephanie Murray at the IBF for details, Email: stephanie.murray @ ibf.org
Here are some of the upcoming IBF events that are appropriate for students and professionals wanting to learn more:
Eugene J Lee
W.P. Carey School of Business
Arizona State University