Holiday Chaos Exposes Weak Management Systems, Says Oliver Wight Chief

When the third quarter closes, many companies start behaving as though something extraordinary is about to happen, according to Andrea Montecchi, chairman of Oliver Wight Americas. Demand plans get re-examined. Inventory, capacity and supplier commitments face fresh scrutiny. Meetings multiply.

By then, in Montecchi's assessment, it is probably too late.

There is nothing unexpected about the holiday season, he writes. Manufacturers and retailers know it is coming, understand its importance, and have years of experience to inform strategic plans. Yet the annual ritual of year-end crisis management repeats anyway.

"It's not too late to expedite a shipment, reposition inventory, or change a promotion," Montecchi notes. "But it's too late to build the management capabilities necessary to deal effectively with uncertainty."

More importantly, he argues, many companies are trying to solve the wrong problem entirely.

A forecast is not a plan

Perfectly predicting holiday demand is impossible. But Montecchi draws a sharp distinction between two tools companies often conflate.

A forecast is a prediction — an informed estimate of what future demand might be. Like a weather forecast, it provides useful information. A demand plan goes further. It converts that expectation into an intentional business commitment: what the company intends to sell, the assumptions supporting that expectation, and the resources and actions put in place to deliver it.

"A forecast tells us what we think will happen," Montecchi writes. "A demand plan establishes what we intend to do about it."

Committing to a plan does not mean assuming it will be correct. Consumer behavior changes. Competitors act. Promotions surprise. Suppliers miss commitments. Economic conditions shift. Good planning, he argues, prepares the organization for those uncertainties by making the assumptions behind the plan explicit.

Decisions come next

Once assumptions are explicit, management must determine whether they still hold — and if they don't, what decision follows. Montecchi calls that preparedness.

The value of scenario planning, he says, lies in considering what decisions alternative futures might require before the pressure arrives. If demand materially exceeds the plan, what happens? If it falls short, when does replenishment change? If capacity becomes constrained, which products, customers or channels take priority?

Not every possibility needs a predetermined answer; judgment still matters. But consequential uncertainties shouldn't arrive in the executive meeting for the first time only after they have become consequential. As Montecchi puts it bluntly: "A scenario without an associated decision is simply an interesting possibility."

The same discipline applies to inventory. The instinct during the holidays is to protect availability. But Montecchi pushes back on that reflex. "Inventory doesn't insure against uncertainty. Inventory is capital placed at risk." Carrying more may be the right decision — or the right decision may be accepting a greater risk of stockout to protect cash or margin. The business must intentionally decide where it is willing to place risk and why.

Data doesn't make decisions

Technology can surface the issue, but people make the decisions. Montecchi says he has seen organizations with sophisticated planning systems and extraordinary amounts of data still struggle to make timely decisions.

If decision rights are unclear, teams may pursue conflicting objectives and routine exceptions may require executive escalation. In these situations, better visibility does not solve the underlying problem, he warns — it simply allows the organization to watch the problem unfold in greater detail.

Decision-makers need a common plan, clarity about its assumptions, appropriate authority, and enough latitude to act when circumstances materially change.

An annual stress test

Demand volatility, inventory exposure, supplier constraints and compressed decision windows become more pronounced during the season, but they are not unique to it, Montecchi argues. The holidays simply compress normal business uncertainty into a shorter, higher-stakes period.

That makes the holiday season an annual stress test of how well the business is managed every other season of the year.

If navigating the fourth quarter suddenly requires special meetings, new dashboards, emergency supplier coordination, extraordinary planning exercises and constant executive intervention, then perhaps the normal management system needs fixing. The holiday season may warrant greater attention, but it should not require different management capabilities.

His prescription for executives now: challenge the demand plan, its assumptions, and where the company has chosen to place risk. Make the adjustments that still matter. Then ask why extraordinary measures were necessary in the first place.

The best-prepared companies, Montecchi concludes, will already be accustomed to planning amid uncertainty, recognizing material change, making effective decisions, and acting in time to affect the outcome. The holidays are predictable. The outcomes aren't — and managing that uncertainty, he argues, shouldn't be seasonal work.