Thursday, January 30, 2014

Focus and Leverage Part 299

This week in Atlanta and suburban areas we had a winter storm and although we only received 2 or 3 inches of snow, the city has been virtually shut down.  If you’ve been watching the national news, you probably have seen the massive traffic jams and hear stories about how many children had to spend the night in their schools because the roads were impassable with lots of ice.  There was one story about a father who was worried about his 5 year old daughter who actually walked 6 miles to his daughters school to spend the night with her.  There were stories of heroism and people taking in complete strangers because they were stranded.  Everything that you saw and heard about this “snow event” were absolutely true!  All of this over 3 inches of snow!

In the aftermath of this winter storm, the finger pointing and blame game erupted over the forecast being wrong.  On Monday the National Weather Service had issued a winter weather advisory for areas mostly south of Atlanta.  On Tuesday the forecast had changed to a winter weather warning, but still mostly South of Atlanta.  But when this snow event actually hit Atlanta, the location of the snow and ice suddenly changed as both North and South Atlanta we hit with an accumulation of up to 3 inches. 

Yesterday the Mayor of Atlanta and the Governor of Georgia both held separate news conferences to explain the obvious lack of preparation for this winter storm, trying to explain their way out of criticism.  When asked why they hadn’t “pre-treated” the roads with salt to make sure the roads around Atlanta were passable, both the Mayor and the Governor pointed the finger at the weather forecasters!  I laughed to myself and continued listening as one-by-one both fielded questions about the lack of preparation.  Excuse after excuse came from both the Mayor and Governor, but the central theme of their rebuttals was that the forecast was wrong.

One of the things that I have written about on this blog is how, if you rely on forecasts to plan what happens in your company, there is a high probability that you will be wrong. Yet companies continue to use software with sophisticated algorithms to plan their production and order their raw materials.  According to Hop and Spearman in their breakthrough book, Factory Physics, the first of forecasting, for those of you who don’t know, is that forecasts are always wrong!  The second law of forecasting tells us that, detailed forecasts are worse than aggregate forecasts.  The third law of forecasts is, the further into the future, the less reliable the forecast.   They also tell us that, “no matter how qualified the expert or how sophisticated the model, perfect prediction of the future is simply not possible; hence the first law.”  And finally, Hopp and Spearman tell us that, “Since our estimate is likely to be approximate at best, we should strive to make decisions as robust as possible with respect to errors in the forecast.”  So with all this in mind, is it any wonder that, if the Mayor and Governor both followed a forecast to plan and execute their respective actions, then it should come as no surprise that huge mistakes were made in preparing for this winter event.

My belief is that we should always plan for the worst, but hope for the best.  If both the Mayor and Governor had followed this simple plan, then the state and local roads would have been pre-treated and much of the chaos would not have occurred.  Both the Mayor and Governor found themselves in a reactive mode instead of being proactive.  There’s lessons for all of us to learn from this “amazing” snow event!

Bob Sproull

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