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By Root 3181 0

should be: the faster we can respond, the more reliable is the forecast. Embedded in that sentence we have the recognition that we should not look too far into the future when framing production orders. However, there is a minimum time into the future where we need to ask the question: how much might we sell? The default assumption is that we want no shortages and for that, we are ready to pay the price of holding more inventory than we would need in a world with perfect knowledge. Therefore, our aim most of the time is to have full availability of those items on which we choose to maintain excellent availability, while the amount of stock is nicely controlled at a level that is still appropriate for preventing shortages.

The question points to the need for a different type of forecast, not the regular one. The question is not directed at the average sales within the response time, but at what we might actually sell. In other words, forecasting the maximum sales that we could reasonably expect for that period of time. In order to fully support availability while refraining from overproduction, two practical insights emerge:

1. Production still needs to focus on the flow to finished-goods inventory, flowing the required quantity as fast as possible through the shop.

2. Unless we have a good reason to believe that the market demand is going to change, or that the current inventory in the system is either too high or too low, then a simple straightforward reaction to any sale is to replenish that quantity. This means that replenishing the exact quantity of what was sold is a natural default. From the production planning perspective, it means that everyday production should initiate producing the exact quantity of what was sold yesterday.

From the two insights, it is clear that we need to determine the appropriate inventory in the shop that would provide perfect availability, thus maintaining the fastest flow of goods to customers. The other critical point is to improve, and keep improving, the internal flow.

Another understanding emerges. If the objective is to provide perfect availability to customers, then we should state that openly and probably take one more step and commit to maintain that availability openly by letting our customers know that is our commitment.

From MTS to MTA

The verbalization of the ultimate objective is: We commit to our chosen market to hold perfect availability of a group of specific end products at a specific warehouse.

This objective has two critical elements in it. One is the marketing message, defining the target market, the items that it includes, and possibly also some limitation of the one-time demand that such an availability would provide. The other is the operational element. Once a commitment is given, Production must perform to meet that commitment.

Let’s now clarify the relationship between MTS and MTA. Certainly any case of MTA requires MTS, unless production can be done in a few seconds. However, many cases of MTS are definitely not MTA. Those cases happen every time there is no concrete commitment to availability.

Let’s present two different examples for MTS that is not MTA.

Example 1 Painters, including famous ones, paint regularly for stock, meaning without a specific client commissioning the painting. However, many paintings are done only once, there is just one unique single copy. In some cases, a limited number of copies (authorized prints) are produced. This definitely is not a commitment for availability. Similarly, exclusive fashion items are also promised to be single units; there is no promise of availability.

Example 2 Items that are going to be sold in a specific period of a few days, for instance, souvenirs for a specific sporting event, like hats or T-shirts, with the appropriate logo and colors for one of the teams for the big final game, will need a lot of stock before the event. After the event, sales will be very low. The time those items are sold is so short that there is no practical chance to replenish. In such a case, there is no clear