Written by John Dyer - May, 2020
“How many units can we reliably supply our customer?” asks the V.P. of sales. “And don’t make us look like fools by telling me a number that will never be consistently met!”
“I will tell you that number,” said the V.P. of manufacturing, “just as soon as you look in your crystal ball and give me a forecast that predicts how many units you all will sell over the next 12 months!”
Does this conversation sound familiar? It is the constant tension that usually puts up big, thick silo walls between sales and manufacturing, the two organizations that have an impact on either side of the demand/capacity equation. If the V.P. of sales were to ask the question above, would manufacturing be able to give a straight answer? Would the response begin with all of the reasons why an answer is not possible (model mix, seasonality, unpredictable downtime and quality issues, etc.)? Or, maybe the answer is a theoretical maximum output. (“One day, last decade, we produced X number of units, so that is my answer.”).
This response will cause great frustration if the sales folks thought “X” was a real number and started planning to try and create that much demand. The more likely answer will probably be something with the word “average” in the mix (“We average making Y units per day/week/month.”). Of course, the problem with driving demand to an average is that roughly 50% of the time the output will be too low to meet the expectations.
The better answer would be a range based on a process behavior chart of actual output: "We can reliably produce somewhere between A and B with an average of C where A and B are the upper and lower limits." If the sales V.P. pushed hard enough (“How many units can we reliably supply and let’s assume our jobs are on the line?”), then the only number that can be used is the lower limit (B) -- which in some cases may be close to zero.
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