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If the demand spikes suddenly, should we increase production?
We have all been through such situations multiple times. And the answer seems to be obvious… We must.
Why am I asking such a simple question? I am provoking you to examine how our supply chain systems would answer it. Let me warn you, the answer may be disturbing…
A lot many companies don’t actually increase production in case of a sudden demand surge. Their production plan and Master Production Schedule are more or less fixed in the monthly S&OP meeting. They lack flexibility in making significant changes during the month. They hope to meet the extra demand through safety stocks. And if the safety stocks fall short, they let go of the additional demand, justifying the loss ‘due to an extraordinary surge in demand’!
Let’s design our supply chain processes and practices to be more responsive. Simple rules will do the trick.
Demand spikes, increase production. Demand slumps, reduce production.
Agility is that simple.