If You're Driven by Demand, You're Probably Being Driven Crazy
As an observer of P&G for many years, I don't think they are demand-driven. In my opinion they are consumer-driven and they are holistic in their vision of the flow of demand throughout their organization and the channels they operate in. However, their focus is on profitably responding to demand. In consumer industries, as I learned at IRI, demand variability is so wide, so unpredictable, and so influenced by any number of dimensions, consumer fickleness among the biggest, that if you are driven by demand, you will be driven crazy.
Remember my good friend Rick Blasgen from Nabisco, now CEO of CSCMP®? When I was at IRI and working with Blasgen at Nabisco on some of our first integrations of POS data analysis and DRP, he called me one night.
“Rich, I finally figured out what we are going to do to improve our forecast accuracy,” he told me.
“Wow, Rick, that's great!” I exclaimed. “Did you find a new forecasting methodology? Are you going to implement a POS-based replenishment system?”
“Nope, we are going to put in a call center,” he replied firmly.
“What?” was my puzzled response.
“Yeah, we're putting in a call center to phone 200 million consumers every night and ask ‘em what they're gonna buy tomorrow,” he explained.
Then, after a good laugh, we started to discuss the reality of the unpredictability of what consumers are going to buy every day. My children, when we lived in Chicago, used to love making queso ...