John Conover said,
"I made an attempt to link organizational issues (which I presumed to
have fractal characteristics,) to the corporate P&L....the qualitative
analysis, without having access to any other data other than the time
series of the market's rate of revenue returns, would seem to predict that:
....[among other things]
it would seem to be shown that visibility into the
future, regarding rate of revenue returns, was only a few months,
at best. This would seem to be in disagreement with the prevailing
concept that "strategic planning" should be "long term." An
interesting interpretation of this may be that these industries
require a more dynamic management methodology, perhaps using
"rolling" budgets, etc. to approximate an immediate feedback
mechanism. But this would seem to be inconsistent with
methodologies where objectives are monitored on an annual basis-it
would seem that profit and loss issues are very dynamic, and,
probably, require detailed attention at no more than a monthly
rate, including inventory and project management issues."
John,
As a former mathematician, I can guess you must have had lots of fun with
this. Your comments on inventory management ring true to me, and I have
long thought we should be looking at inventory through the lens of chaos
theory. We need the right theoretician to put this on a sound footing.
There is, however, an inherent conflict between product development cycles
(not product life cycles) and your thoughts that strategic planning should
perhaps not be "long term." Your analysis is correct. Visibility into
the future is no more than 2-3 months in general. As a consequence, the
goal of strategic planning should be to create flexibility so that an
organization knows how to respond to upredictable changes in ways that
further the corporate purpose.
For example, if the corporate goals include being in-stock at a high rate
(95%, let's say), 10% liquidations, and 3.1 turns, and I get a sales plan
for $1 billion, I know how to develop an inventory plan to meet those
goals. If the sales plan is $1 billion, with possibly 1.10 billion on the
high side (10% probability), and $0.8 billion on the low side (also 10%
probability), then I also know how to develop that plan, but there are two
differences.
First, it is not the same plan, and second, there are uncertainties in my
plan which were not in the original. When my plan goes to the receiving
people, the warehouse people, and the vendors, they will have
uncertainties to build into their plans as well. It cascades downward.
Furthermore, as a result of the planning process, I will develop scenarios
for the latter situation (uncertainty) which will allow me to train and
prepare my staff, communicate to vendors, and put into place contingencies
to support specific but unlikely events. When demand comes in at, say,
the $0.8 B rate, everyone will know pretty much what to do to meet the
plan.
-- Rol Fessenden <76234.3636@compuserve.com>