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August 10th 2021

The right math for the right problem

Over and over again I have heard comments that the math behind DDMRP is too simplistic. Yet in the real world these ‘simplistic’ formulas have resulted in my clients substantially reducing (+40%) their inventories, improving their service (+8%) and eliminating emergency costs. I have started developing a few theories on this matter.

1 – ”The wrong math at the wrong time” theory
Trying to use Einstein’s theory of relativity to solve a basic quadratic equation might sound impressive but I believe even Einstein would laugh at you. All math formulas have a purpose, a time and a place, and expecting Planners to gain insights from incredible complex formulas while fighting raging operational fires is not the time nor the place. So, give the Planners the right tools that don’t require a doctorate in Applied Mathematics to interpreter and the results will surprise you.

2 – “What’s the point if the ”precisely right math is just ignored” theory?”

What has always attracted me to math, is that there is always a precise answer. However, having spent 20 years selling APS optimization solutions, it is incredibly frustrating when all this clever (and expensive) math is just ignored. One thing Demand Driven has reminded me of is that inventory operators within a range and being roughly right initially is much more powerful than being precisely wrong! ……then over time, extract the value of clever math through a continual improvement process that focuses on Order Signal Integrity and Model Outliers.

Make no mistake, I absolutely believe in clever math, at b2wise we are now using AWS’ Machine Learning to better sense demand and Right Size Inventory’s patented Monte Carlo Simulations to find a more optimal Red Zone, but only once the basic math is in place and working.