A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.



Mgt fix like more Titanic lifeboats

Sir, Yossi Sheffi ("A demand for steady supply", August 22) lays down an unexceptionable set of rules for building a demand-responsive supply chain. Yet, as Stephen Cecchetti observed four years ago ("Halfway to vanquishing volatility", August 22 2001): "How ironic that the producers of the equipment that was supposed to eliminate the inventory cycle were themselves its first victims."

Prof Sheffi is advocating a supply chain that still reacts to demand fluctuations, assuming them to be ultimately unpredictable. But, as Prof Cecchetti's comment underscores, the Achilles heel of supply chain management systems during the 2001 recession was precisely their inability to foresee the downturn. Without such forward vision, these systems are doomed to be blindsided by business cycles. In effect, making the suggested improvements is tantamount to building better lifeboats for the Titanic.

Workable techniques for predicting cyclical turns in the economy and industry demand may not yet have penetrated the halls of academe. But they are already being used successfully by companies ranging from Disney to DuPont, from Toyota to the Taiwan Semiconductor Manufacturing Corporation. Thus it is certainly worthwhile for supply chains to develop the agility to deal with "the inevitable errors of forecasting", but it is downright critical for them to incorporate demand forecasting systems that get the big calls right.