Here is my simplified decision making process on planning -
Step 1: Start with FACTS: Have I run the numbers (or done the analysis)?
Example: Run consumption history; ask internal/external customers for FCST; use certain distribution to simulate the demand.
If we haven't run numbers, how do we know if we are stocking too much or not enough?
Step 2: Know the impact
How much cash I am going to spend (assuming I am spending my own money)? Keep in mind it is easy to turn cash into inventory; it is difficult to do the opposite.
What I am going to get in service level (assuming I am the customer AND stockholder)?
Step 3: End with JUDGMENT: Can I explain it?
Formulas or planning tools can give us all kinds of proposals, good or bad. Their proposals are only as good as assumptions they use.
In planning world, many times our assumptions don't necessarily hold.
It is people who make the judgment. That's where we add great value to the organization.
So end with judgment and be able to explain to ourselves why we make certain planning decisions.
