Gaps, defined as the deltas between stocks and desired stocks, are proportional with adaptation time (AT); the period a manager allows himself to close the gap. In a continuous situation, with a gap that is never fully closed, the gap becomes proportional with AT. Intuitively, managers don’t want large gaps, so they order replenishments with low AT. If the AT they  use is smaller than the lead-time, they may cause oscillation.  If you don’t believe this, try ordering your goodies faster and observe whether your supplier will become more volatile.  If you want to know more, give us a call.

One of the least popular applications of the Flostock models is to use them for target bonus systems. A target could be:  “Do 0,5% better than the market”. Half a percent Market Share increase per year would be great in many markets. The models calculate market demand based on end market consumption and stock movements in the chain and they do that so well, that it becomes crystal clear what the managers contribute to the business result and thus what kind of bonus they deserve.  In an up going market the managers could no longer claim the windfall growth that comes automatically. And although in a declining market this would benefit the managers, because they would be able to show that they’d done better than the market, many managers are reluctant to work under transparent conditions.