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DSI Principles

Now that the ideal structure of DSI has been described, along with typical aberrations to that ideal, discussing some of the guiding principles that should drive the implementation of DSI at any company is appropriate. Three guiding principles are that

  • DSI should be demand driven. Many years of supply chain research conclude that the most successful and effective supply chains are demand driven. In other words, supply chains are most effective when they begin with the voice of the customer. DSI processes should reflect this demand-driven orientation. The “Demand Forecast” arrow in Figure 1-1 represents this principle. The demand forecast is the voice of the customer in the DSI process. However, in too many instances, this customer voice is not as well represented as it should be, because sales and marketing are not as committed to or engaged in the process as they need to be. Because of culture, driven by measurement and reward systems, the weak link in many DSI implementations is the engagement from sales and marketing. Chapters 4, “Qualitative Forecasting Techniques” and 5, “Incorporating Market Intelligence into the Forecast,” explore this phenomenon in greater detail.
  • DSI should be collaborative. Figure 1-1 indicates that inputs to the process come from a variety of sources, both internal and external: sales, marketing, operations, logistics, purchasing, finance, and senior leadership represent the typical internal sources of information, and important customers and key suppliers represent the typical external sources of information. For this information to be made available to the process, a culture of collaboration must be in place. This culture of collaboration is one where each individual who participates in the process is committed to providing useful, accurate information, rather than pursuing individual agendas by withholding or misconstruing information. Establishing such a culture of collaboration is often the most challenging aspect of implementing an effective DSI process. Senior leadership must play an active role in developing and nurturing such a culture.
  • DSI should be disciplined. When I teach undergraduate students, who often have little experience working in complex organizations, I often make the point that “what goes on in companies is meetings. You spend all your time either preparing for meetings, attending meetings, or doing the work that results from meetings.” DSI is no different. The core of effective DSI processes are a series of meetings, and for DSI to be effective, the meetings that constitute the core of DSI must also be effective. This means discipline. Discipline comes in several forms. The right people must be in attendance at the meetings, so decisions about balancing demand and supply can be made by people who have the authority to make those decisions. Agendas must be set ahead of time and adhered to during the meetings. Discussion must focus on looking forward in time, rather than dwelling on “why we didn’t make our numbers last month.” To develop and maintain such discipline, an organizational structure must be in place where someone with adequate organizational “clout” owns the process and where senior leadership works with this process owner to drive process discipline. Once again, this points to organizational culture being critically important to DSI process effectiveness.

When these principles are embraced, then the “magic” of DSI can be realized, as shown in Figure 1-6.

Figure 1.6

Figure 1-6. DSI “magic” comes from hitting the sweet spot.

The “sweet spot” shown in Figure 1-6 is the intersection of three conflicting organizational imperatives: maximizing customer service (having goods and services available to customers at the time and place those customers require), minimizing operating costs (efficient manufacturing processes, minimizing transportation costs, minimizing purchasing costs, and so on), and minimizing inventory. This “sweet spot” can be achieved, but it requires DSI implementation that is demand driven, collaborative, and disciplined.

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