A Response to Lora Cecere's May 5, 2017 Article About "Demand Driven"
On May 5, 2017 Lora Cecere published an article about the term “Demand Driven” and the activities and methods of the Demand Driven Institute. If you have not read it the link is here: http://www.supplychainshaman.com/demand/demanddriven/demand-driven-can-we-sidestep-religious-arguments/
This article was nothing short of a huge surprise coming from someone that we have collaborated with over the past few years and have known for a long time before that. This article is extremely inaccurate, misinformed, inflammatory and libelous
This page is a point by point response to her article.
The History of Demand Driven
“In the period of 2005-2010, I created research on the topic of demand-driven value networks as an analyst at AMR Research. This ended when Gartner purchased AMR Research in 2010. Since I do not believe in the Gartner business model, I left. After reflection, I broadened the demand-driven concepts and started writing about Market-Driven Value Networks in 2012.”
This seems to imply that Lora is claiming to be the originator of the term “Demand Driven” and that the term was later “co-opted” by others and distorted. This impression is completely false. The term Demand Driven was brought to AMR (whom Lora worked for) by PeopleSoft in 2003. One of the leaders of that PeopleSoft initiative was Carol Ptak, Vice President of Manufacturing and Distribution Industries (and later co-founder of the Demand Driven Institute). Carol has copies of the original briefing file to AMR as well as the marketing material used by PeopleSoft. PeopleSoft spent $5.5M developing and marketing the concept. Below you can see examples of the PeopleSoft marketing material and presentations on the topic from 2004.
Official DDI Response
Let’s establish something right up front. In 2003 the definition of Demand Driven was developed by a PeopleSoft team including Carol Ptak as:
“Sense changing customer demand, then adapt planning and production while pulling from suppliers – all in real time!”
Lora then claims that the Demand Driven Institute (DDI) revised that definition in 2013. That is simply incorrect. DDI was founded in 2011 by Carol Ptak and Chad Smith at the same time their book Orlicky’s Material Requirements Planning 3/E was being published. In that book Ptak and Smith maintain the original definition. Page 385:
“Demand-driven manufacturing is a manufacturing strategy of dramatic lead time compression and the alignment of efforts to respond to market demands. This includes careful synchronization of planning, scheduling, and execution with consumption. It was coined by PeopleSoft in 2002 and embraced later by several research companies. It is important to point out that demand-driven manufacturing is not synonymous with make-to-order manufacturing. Demand driven manufacturing requires a fundamental shift from the centrality of inventory to the centrality of demand. To be successful, a company must be able to sense and adapt to market changes.”
Fast forward to 2016 and the release of Demand Driven Material Requirements Planning by Carol Ptak and Chad Smith. On pages 51-52 Ptak and Smith write:
“But first it may help to understand what the term “demand driven” really means and the history behind it. The term was originally defined as the ability to “sense changing customer demand and adapt planning and production while pulling from suppliers all in real time.”… The term was pioneered by PeopleSoft in 2002 while Carol Ptak was the Vice President of Manufacturing and Distribution Industries. When Oracle acquired PeopleSoft in 2004 the term was largely abandoned. It was then resurrected in 2007 by Applied Manufacturing Research (AMR). In 2010 AMR was acquired by Gartner and Gartner used the term as part of what it called its “Demand Driven Value Network” approach… The original definition of demand driven still works in today’s more mature and larger demand driven body of knowledge. Additionally, this maturation and expansion has provided clarity on precisely what demand driven does not mean. It does not mean make to order everything. It does not mean put inventory everywhere. It does not mean forecast better. Becoming demand driven requires a fundamental shift from the centrality of supply and cost based operational methods (commonly referred to as “push and promote”) to a centrality of actual demand and flow based methods (commonly referred to as “position, protect and pull”). The term “actual demand” is extremely important in distinguishing it from a rebranded and somehow superior forecasting approach.”
In Lora’s Figure 2 in her article she chronicles a list of evolved definitions using “Demand Driven”. The 2004 definition is very close to what it should be:
“Demand-driven Supply Networks: As defined by AMR Research in 2004: a supply chain that sense and translates market signals in real-time.”
Why is it close to the PeopleSoft and DDI version? PeopleSoft had just shared the definition and the concept with AMR! Figure 2 also shows that Lora chose to significantly alter the definition in 2010 to:
“An adaptive network focused on value-based outcomes that senses, translates and orchestrates market changes (buy and sell-side markets) bi-directionally with near real-time data to align sell, deliver, make and sourcing organizations outside-in.”
According to DDI, Ptak and Smith the definition of Demand Driven remains today what it was in 2002. Which begs the question – who really co-opted whom?
In fact the distortion to the definition and intent of the method was a significant reason that Ptak and Smith chose to jump back into the “Demand Driven” world. In their opinion the term had been distorted by analysts and software companies and reduced to vaporware with few concrete steps for companies to take. In addition this distortion completely lacked any defined technical discipline to really affect companies. “Demand Driven” seemed to have simply degenerated to “Analyst Speak.”
DDMRP - Not the End State
Lora seems to imply that the Demand Driven Institute, Ptak and Smith think that Demand Driven MRP (DDMRP) is the end state; that implementing DDMRP alone makes a company Demand Driven. This is completely false and indicates a lack of research on Lora’s part. The Demand Driven Institute, Ptak and Smith have consistently said and written that DDMRP is the starting point to transform an organization into a Demand Driven Adaptive Enterprise. It is a very significant start but just a start nonetheless. DDMRP is only one component of a Demand Driven Operating Model. The Demand Driven Operating Model is one component of the Demand Driven Adaptive Enterprise (DDAE) Model. The DDAE model spans three relevant ranges (Operational, Tactical and Strategic) and has concrete, actual actionable steps and measures in each range. Furthermore, there is a defined development path for a company to mature into a Demand Driven Adaptive Enterprise. In this maturity model white paper, Lora is actually acknowledged for discussion in the development of that model. For more information: http://www.demanddriveninstitute.com/demand-driven-adaptive-enterprise-m
Unfortunately, Lora seems to have ignored these facts or she did not spend enough time researching what DDI is doing. This is a surprise since research has been billed as a strong suit for Lora.
The Role of Forecasting
Lora is completely misinformed about the DDI and Ptak and Smiths’ position on forecasting. She writes:
“I also believe that forecasting plays a vital role in determining the rules for inventory buffers, driving market-to-market orchestration, and defining the principles for network design.”
Ptak and Smith agree! Forecasts ARE relevant. Companies SHOULD forecast. Many companies SHOULD use forecasts to shape or configure buffers and help define direction. In both Orlicky’s Material Requirements Planning 3/E and Demand Driven Material Requirements Planning Ptak and Smith spend a tremendous amount of time on this issue. Forecasts are absolutely relevant in the strategic range.
DDMRP has five components:
Strategic Inventory Positioning
Buffer Profiles and Levels
Demand Driven Planning
Visible and Collaborative Execution
The third component (Dynamic Adjustments) is about adjusting/configuring buffers based on what has happened and what is forecasted or planned to occur. This is a direct tie-in to forecasting activity. For more on this please consult pages 131-148 in Demand Driven Material Requirements Planning and pages 425-423 in Orlicky’s Material Requirements Planning 3/E.
What Lora does not seem to understand is that Ptak and Smith are proposing to exclude planned orders from the daily replenishment net flow equation in the operational relevant range. Most planners and buyers with any moderate amount of experience understand this basic proposal – it may seem scary to them at first but they understand it. Lora seems to not understand this basic proposition mistaking for a wholesale attack on forecasting or, once again, she has failed to sufficiently research it.
Furthermore, another component of a Demand Driven Adaptive Enterprise is the tactical reconciliation process known as Demand Driven S&OP. One crucial aspect of Demand Driven S&OP is to use forecasts to project the Demand Driven Operating Model performance as well as to adapt the model based on what is expected in the future. Pages 269-292 in Demand Driven Material Requirements Planning detail this. Some highlights:
“DDS&OP includes model management and establishing the parameters for capability. Actual demand runs the system. As opposed to traditional S&OP where the outcome is a master production schedule – a statement of what can and will be built – DDS&OP defines a capability so the company can profitably build what can and will be sold. Demand Driven Sales & Operations Planning is required as the linkage between strategy and tactics to do the necessary integrated reconciliation and at the same time take advantage of all the demand driven capabilities that have emerged and can be exploited for new markets…”(page 269)
“A critical aspect of Demand Driven Sales and Operations Planning is the ability to project the Demand Driven Operating Model performance given specific capabilities against a projected demand.” (page 280)
DDMRP "Science Projects"
“However, despite the excitement, the current implementations are largely science projects.”
Once again Lora seems to be uninformed on the history, proliferation and consistent results achieved by DDMRP in both small and large companies – make to order and make to stock. A science project seems to imply a hypothesis and a validation process of discovery – that the end is not really known, simply predicted. The results of DDMRP implementations are consistently proven across the board. Please see dozens of case studies across a wide array of industries available here: http://www.demanddriveninstitute.com/case-studies
This level of documentation about consistent results should suggest this is more than an experiment. Given that written approved case studies are typically a small percentage of actual implementation, this long list of cases would suggest a much larger number of implementations globally. In fact, many companies will not share their success stories because the Demand Driven method is now their source of competitive advantage.
“In addition, the Demand Driven Institute certifies and sells software, and I think this is a conflict of interest.”
This statement is false and constitutes libel. DDI has never sold software. DDI started in 2011 as an education and certification entity and that has not changed. Our mission is to advance and proliferate Demand Driven strategies and practices in the global industrial community.
For the record:
DDI and/or its principals DO NOT SELL software.
DDI and/or its principals own no interest in ANY software entity.
DDI and/or its principals are not a part of any software entity Board of Directors.
DDI has never received a payment or a commission for a software sale.
Lora’s statement completely misrepresents the activities of DDI and does so in an extremely damaging way. DDI has requested a retraction of this libelous statement and a published apology. We will vigorously defend our reputation and ethical standards.
DDI DOES certify software as compliant to basic DDMRP standards. DDI performs this compliance review of products FOR FREE! DDI does this in order make sure that no one “co-opts” or distorts what basic DDMRP functionality should look like. Furthermore DDI is completely transparent about the process and how the software is judged. We published the standards in Demand Driven Material Requirements Planning (page 293-294) as well as have a web page dedicated to software compliance: http://www.demanddriveninstitute.com/compliant-software
Ironically, after Lora talks about DDI’s “conflict of interest” with regard to software she seems to go out of her way to actively encourage the purchase of several software packages.
A Failed Collaboration
Finally Lora writes:
“This is something that I have tried to accomplish with the Demand-Driven Institute, but failed.”
It failed because 11 months ago Lora proposed abandoning the term “Demand Driven” altogether in favor of her new term “Market Driven.” This was after Carol Ptak worked with Lora on Lora’s maturity model for Market Driven Supply Chains as a follow up to a commitment made after Carol’s presentation at Lora’s conference a year earlier. Obviously, this proposal was an absolute show stopper for the Demand Driven Institute on the eve of the release of a new book called Demand Driven Material Requirements Planning. Now suddenly she seems to care about the term “Demand Driven” once again?
Lora also writes that she disagrees with the Demand Driven Institute approach to S&OP but does not provide any detail. The Demand Driven Institute has never briefed Lora on the Adaptive S&OP or DDS&OP schema. The Demand Driven Institute is proud to be working with Dick Ling – the man who developed the concept of S&OP and wrote the first book on it – to fully develop Dick’s vision for S&OP. This vision is now possible when a company uses a Demand Driven Operating Model. Dick has come out of retirement to complete his S&OP legacy and will be joining Carol Ptak on the global roll-out of this exciting new approach that leverages his lifetime of S&OP development and commitment against the work of the Demand Driven Institute. In Dick’s own words the work that the Demand Driven Institute has championed represents, “the most significant advancement in supply chain in the last 50 years.”
The Demand Driven Institute has built a worldwide community around the Demand Driven Adaptive Enterprise methodology. Demand Driven Institute welcomes comments, debate on ideas, and innovations. The Demand Driven World 2017 conference in Lyon France this year will highlight a full day of innovations by community members as well as many case studies. We welcome all who are interested in the FACTUAL current status of Demand Driven and to hear the many case studies from companies like Michelin, Sames Kremlin, British Telecom, Louis Vuitton and many more.