Demand swings grow as they travel away from the customer
💎CORE ARGUMENT
A small change in what the final customer wants becomes a large change by the time it reaches the people furthest from that customer. Nobody in the chain has to be careless for this to happen. Each handover adds a safety margin, and margins multiply.
The shop sees sales rise a little and orders a little more than that, to be safe. The wholesaler sees the order, not the sales, and reads it as a trend. The factory sees the wholesaler's order and adds a shift. Each is responding sensibly to the only number available, and each number is the previous one plus caution. Delay makes it worse, because by the time the extra stock arrives the original bump has passed and everyone corrects downward with the same enthusiasm. Batching, rationing and promotions each add a distortion of their own.
Freight sits at the far end of this whip, which is why carriers experience demand as weather. In Hamburg in October I listened to speaker after speaker describe a volatile market, and most of them were describing their own customers' ordering rules.
It happens inside a product team as well. A customer mentions a problem once. Sales reports it as a pattern, I write it up as a theme, and engineering hears a commitment. By the last step a remark has become a quarter of work.
The remedy is not better forecasting at each link. It is letting the far end see the near end's real number: the sales and not the orders, the customer's sentence and not my summary of it.
🧱BUILT FROM
🌍WHY IT MATTERS
I pass on the original sentence from a customer alongside my reading of it, and I ask Sales for the count of people who said a thing, not the adjective. In scorecard discovery I ask what each party can actually see of the others' numbers.
Still open.
- Does a scorecard dampen the whip, by sharing real performance, or add a new distorted signal that carriers start ordering their behaviour around?
- What is the product-team equivalent of point-of-sale data? Probably the recording, not the notes.
☑️NEXT STEPS
- Paste the customer's own sentence above my summary in every discovery note
- Ask Sales for the count of accounts behind everyone is asking
- In scorecard discovery, map what each party can see of the others' numbers
A simulation showing that delays and ordering rules alone produce swings, and a later paper naming four causes: demand signal processing, rationing, batching and price variation.
One link of this chain is 💎 Delays make a sensible reaction look like the wrong one. The cure has the same shape as 💎 Pull beats push when the downstream step knows more.
Each party forecasts from the orders it receives and adds a buffer against its own uncertainty. The buffered order is the next party's demand signal. Variance therefore grows at every step, and lead times turn the growth into oscillation.
Safety margins exist because the world really is uncertain. A chain with no buffers at all transmits every shock at full strength, and shared data does nothing about a six-week lead time.
The claim got its own note after the conference issue, and it is one of the reasons I think shared carrier data is worth a discovery project.