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It’s no wonder that supply chain planning environments are often challenging and chaotic, with demands coming at us from all directions. While customers and suppliers are often the cause of our anxiety, some of the most threatening fire often comes from our own executive management. Dealing with internal leaders requires courage – indeed, the success of your organization depends on it.

Regardless of whether it’s a deliberate tactic or a reflexive response, when the c-suite instills and maintains a corporate culture that stifles open and honest communication, that leadership can sometimes be our greatest enemy. Over the years, I’ve witnessed situations in which truth and transparency are desperately lacking.  However, fearing the wrath of executive management can make an organization’s stakeholders very reluctant to  reveal bad news. To avoid a dressing-down in front of the troops, bad news is often sugar-coated, or even worse, not communicated at all. One hopes that bad news isn’t a day-to-day event, but when bad news is looming, it should be addressed head-on and in a timely manner.

The Reality Of Demand Forecasting

When it comes to forecasting demand, many factors can contribute to a rosy outlook. We develop and launch new products with the hope that they’ll do well – all the years of researching and developing products inclines us to be optimistic whether it’s warranted or not. Or Marketing is bullish about a new promotion because their budget depends on these projected revenues. But these are anticipated volumes and forecasts do have a remarkable propensity for being less than right, and you are the one who has to separate reality from fiction.

Have the courage to declare that the plan did not materialize – your business will benefit from the truth in the end

What should your organization do when projected volumes aren’t coming to fruition? The sooner you can notify the rest of the organization, the better your chances are of achieving a positive outcome or even mitigating risk.  Yes, there will be a net lower revenue, but additional resources won’t be wasted on building products to a finished goods level, only to sit in inventory. Have the courage to declare that the plan did not materialize – your business will benefit from the truth in the end – and then create and enable alternate strategies to overcome these areas of constrained demand.

New Product Introduction Gate Process

New product introductions can be several years in the making, and the life cycle of that product can be as short as one year. Depending on how much time and money has been invested in the new product, if the product launch fails, it could have an enormous impact on revenue and market share. Product engineering teams generally have a strict set of gates that a product must pass through as it moves its way closer to release.

Rather than ducking for cover, honesty now saves valuable time and money

These pre-defined checks and balances are in place to ensure that the product is ready to advance to the next step. When there are great expectations on launching a new product, no one wants to declare failure on the passage of a gate, particularly if there are many more gates ahead that will course-correct. So, what does a fearful organization do? Rather than face management, it gives the product a pass and lets it move forward. This only moves the problem up the line to the point that it can jeopardize the launch itself. Rather than ducking for cover, honesty now saves valuable time and money.

Truth In Available Line Capacity

Manufacturing lines have finite levels of capacity. We have yet to see a plant state capacity at its full theoretical level, and that makes perfect sense. But when you state capacity at a lower level – sometimes referred to as “sandbagging” – the reduced level of capacity is used by the plant for many reasons, such as variability on the line, or distrust of demand, or another creative explanation. The result is a self-inflicted, artificially constrained plan. We get it. Things happen outside of our control. However, it’s imperative to be honest with your capability up front, because it can only help the overall success of the plan, and it will actually reduce the time for error resolution.

The Supply Is On The Way…..Or Is It?

Suppliers can come in all forms and from all corners of the globe. They provide us with everything from piece parts to semi-finished to fully finished goods. Our ability to deliver a finished product to our customers is highly dependent upon the timely and reliable delivery from our suppliers. We place purchase orders on our suppliers, receive a delivery date, and expect an on-time delivery.

Honest and early communication helps to mitigate the negative impact of late supplier deliveries

But when all deliveries are not timely, what do we say when executives are breathing fire down our necks? When there’s a short window between how much advance notice you have before you need to report to management, what do you communicate before the “shoot the messenger” game starts? The answer is, don’t play the game at all. Honest and early communication helps to mitigate the negative impact of late supplier deliveries.

How Big Is Your Inventory Buffer?

Everybody says inventory is a necessary evil; necessary because we need inventory for order fulfillment, and evil because too much of it ties up cash. Typical marching orders from management include a mandate to reduce inventory levels. But as time passes and inventories rise, or inventory levels dip below minimums, what do you communicate to management? Management won’t like either scenario, but too much is probably the least favorable answer. Why? Because once product is in inventory, you can’t change it immediately. This is a case of bad news vs. worse news—while neither scenario is ideal, communicating accurate levels to the rest of the organization allows for the proper actions to be taken, albeit after the fact.  Inventory might be bad, but it is still that necessary evil which should be measured at actual levels and communicated to management.

Honesty Is Always The Best Policy

The old expression, “Don’t bring me bad news; bring me solutions,” is generally good advice. But what happens when there are no immediate solutions to address bad news? Bad news is bad for a reason – ducking for cover to avoid drawing fire only makes it worse. Honesty and transparency are always the best policy, and open and honest communication are the only ways to address, mitigate, or completely remove the negative impact of bad news. Changing an oppressive business culture into a proactive entity that fosters honest, transparent behavior, starting at the top, will serve any organization well.

Bill Mrzlak is CEO of ChainSequence.com.