The cost of mark downs is usually known, but unfortunately the lost revenue from missed sales in often hidden and usually greatly underestimated.

Since this is a universal problem for most retailers, it must be caused by a common problem. Our experience is that the root cause is the combination of over reliance on forecasts coupled with excessive supply chain batching.

We often describe this approach as creating "fast, smooth flowing river systems" tied directly to the use of their products. Incidentally, Henry Ford and Taichi Ohno (Toyota Production System) who developed the two of most effective systems for linking production to consumer demand, both referred to their systems as "river systems". They both worked to develop smooth fast flowing supply chains – river systems without rapids or dams driven by what customers were actually buying.

supply chains should be built for rapid replenishment of actual, rather than forecasted sales. Creating such a supply system requires both changes in management mindsets and the necessary technology to communicate and respond to actual sales.