How many items should a planner plan?
This sounds a bit like the old tongue twister ‘how much wood could a woodchuck chuck if a woodchuck could chuck wood?’ And, while it also sounds like an easy question to answer it turns out to be ‘one of those questions’ where the answer can be quite complicated.
supply-chain-items-200×225-(2).jpgOver the years I’ve had this question put to me many times in one form or another. I have two responses – a quick, easy answer and a longer, nuanced answer that dives into the complexity behind the question.
When my kids were little they used to ask questions like “Why is the sky blue?” I would always answer with a question – “Do you want the short or long answer?” This is a similar situation!
The short answer
When I am asked how many items a planner should manage I usually equivocate by explaining, as consultants do, that “it depends”. It depends on the type of industry, the complexity of the operation, the volume and velocity of the supply chain, and the automation level of the process and other factors.
Depending on the industry, for example retail, the number of items planned can be significant ranging up to hundreds of thousands while in a manufacturing / production environment the number may be significantly lower. Based on my experience, some light research, an informal survey, and removing the outliers such as those mentioned above, planners typically manage from several hundred to tens of thousands.
Having grown up as a materials planner in logistics I know this number is beholden to Pareto. Fifteen to 20 percent of these are going to be A items (typically volume/dollar sorted) planners typically pay more attention to. The rest are left to the system or rules of thumb to manage until late some Friday afternoon when the phone rings and there is a shortage. Then we go into fire-fighting mode!
Of course the majority of a planner’s time is spent managing the company’s ‘hot list’. This consists of trouble children, new products, and those products on allocation.
Who are the planners?
Interestingly enough the people who manage the parts, items, SKU’s, and locations in our supply chains come by varying monikers. There are Materials Planners, Supply Chain Planners, Demand Planners, Supply Planners, Analyst, Production Planners, and Buyer-Planners depending on the type of operations and which part of the supply chain is being planned.
While there probably isn’t one correct answer to what they are called or what their span of control is, there do seem to be two general models; centralized and decentralized. Which a planner falls under is dependent on the business model of the corporation.
The span of control of planners has multiple variants as well. Planners can be split by geography, product or segment of the supply chain (i.e. supply vs. demand or production vs. distribution). Supply planners or buyers will be focused on planning for and reacting to demand signals generated up stream. Demand planners will be more customer-facing capturing, forecasting and shaping demand. In some companies the span of control can have a business or product life cycle element, like a Service Parts Planner or a New Products Planner.
Throw all these facets into the corporate blender and you end up with someone who carries a hotlist and chases a shortage on a Friday afternoon.
What should planners do?
The gating factor to this question is the maturity level of the organization. And, maturity comes down to people process and technology.
We can automate much of the planner’s day-to-day activity. We can automatically generate a beautiful forecast. We can systematically create excellent statistical safety stocks and derive the best multi-echelon stocking and buffering policies. We can magically (I mean mathematically) create replenishment signals to make sure the phone won’t ring on Friday afternoons.
When we automate the planners’ work, we free up their time to do something else. Which leads me to the more nuanced question at the bottom of these questions; the question we should have asked in the beginning ‘what is the more valuable work planner are now free to do?’
From reacting to planning to anticipating: Moving up the maturity curve.
The more valuable work planners should be engaged in can only be found when the whole organization moves up the maturity curve. What this means is moving from reacting to demand to smoothing out the demand and supply uncertainty.
Out of control planners are like new drivers over-correcting and swerving from side to side. As the process matures and demand and supply uncertainty is managed, planners are able to drive with a lighter hand, a finger on the wheel so to speak.
Systems and automation are a big help in this process. It has been shown repeatedly planners tend to over-react and systems do not. Systems deal unemotionally with shortages and blips in the process.
The application of systems as the organization matures allows the planning organization to move from reacting to planning and finally to anticipating. This is done through automation, visibility and optimization of the supply chain processes.
More than one client has said to me “If we just had the data, the visibility, we could make the right decisions.”
What does a mature supply chain management system provide? It removes the latency and lag of the information in the supply chain. It provides visibility – across echelons and between partners. A mature system creates accuracy and timeliness of information which allows planners to do more and also make much higher quality and higher value decisions.
I’ll conclude with a story from one of my recent interactions with a client. The planner was describing to me how he managed promotions from the retail channel. He told me a story of how he was told by the marketers in retail they were running a promotion. He asked them “How much inventory should I position in the DC?” They replied, “Enough!”
The long answer is not so much “How many SKU’s should a planner manage?” but more appropriately where is the organization on the maturity curve? Where is it headed and how do we provide the planners with the tools they need to help the organization succeed?