The End of the World and other Demand Options

Dec. 20, 2012
We can sometimes consider demand options as a way to reduce variability and eliminate waste in our supply chain.

As the end of the world nears (at least according to some interpretations of the Mayan calendar), many businesses are using this supposed “event” to their advantage.

Some are looking at it as a marketing opportunity, including many hotels and restaurants that are, according to NBC, “launching tongue-in-cheek promotions to profit from the fiery apocalypse forecasts surrounding Dec. 21, one Mayan Calendar's end date. The offers range from end-of-days themed vacation packages to restaurant menus encouraging customers to live it up one last time.”

While this is somewhat humorous, it is an example of businesses using “demand options” to meet capacity as part of a good sales & operations planning (S&OP) process. We sometimes tend to focus too much on supply or capacity options such as running overtime, adding part time workers, sub-contracting, etc., instead of looking at ways to smooth demand, thereby reducing the “Bullwhip Effect” on our supply chain, which is a MAJOR cause of waste.

For those of you not familiar with the Bullwhip Effect, it occurs as variability in demand downstream gets magnified as it works its way up the supply chain from retail customer to manufacturer and even supplier.

Collaboration and visibility can help organizations to anticipate and plan for this using demand options such as “everyday low pricing” which Wal-Mart has accomplished in cooperation with a variety of suppliers, such as Proctor and Gamble.

So, assuming the world doesn’t end on December 21, maybe we can at least use the “non-event” as a reminder that we can sometimes consider demand options as a way to reduce variability and eliminate waste in our supply chain.

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