Blog #29: The Cows Don’t Care About Your Forecast
I sat down recently with two execs from a major dairy company in the northern hemisphere. Within ten minutes we were deep into why standard IBP thinking doesn't quite work for them. It never has.
Dairy just makes it impossible to pretend otherwise.
Supply Doesn’t Wait for Demand
Most traditional IBP thinking starts with demand and works from there. Forecast the demand, plan the supply, balance the two. Even more modern approaches assume you can control when and how much you produce. Tidy. Logical. Works beautifully - in the textbook.
In dairy, the cows are producing milk whether you want it or not. Every day. Rain or shine. Your supply doesn’t wait politely for a demand signal - it arrives at the factory gate and says “deal with me.” You’ve got about three days to process it before it’s worthless.
That’s not a logical linear demand-driven supply chain - that’s a wall of supply coming at you irrespective of what your customers want. Welcome to dairy.
The Dairy Engine Room
Here’s what makes dairy IBP genuinely different. The real engine room isn’t the demand review. It isn’t the supply review. It’s what sits between them - the complex steps where cross-functional teams decide where the milk flows go, balance them against demand, and optimise for the best margin outcome and plant utilisation.
Same raw milk can become fresh milk, cheese, butter, milk powder, infant formula - each with wildly different margins, shelf lives, and customer commitments. That decision about where to direct the milk pool is where value is made or lost. Get it right and you’re maximising your return. Get it wrong and you’re dumping product or missing your highest-value markets.
This can’t wait for a one-off reconciliation review. It has to happen before supply review, not after it.
And it gets messier. The composition of the milk itself - fat content, protein levels - varies by region, by farm, by season, even day to day. Especially in pasture-fed operations, where the cows eat grass, not grain. Your raw material isn’t just variable in volume - it’s variable in what you can and cannot actually make from it.
Then there’s the stainless steel. Dairy processing plants are enormously expensive, purpose-built facilities. You can’t just flick a switch and redirect output from powder to cheese. These plants need to run as close to capacity as possible to justify their existence - which means your options are constrained not just by the milk, but by what your assets can physically do with it.
So you’ve got uncontrollable supply, variable composition, inflexible processing capacity, and a product that spoils in days. Try putting that in a standard linear IBP template.
Every Industry Has Its Version
Dairy is an extreme example, but here’s the broader point: every industry has its own version of “the cows don’t care about your forecast.”
Fishing has catch variability and quotas. Mining has ore grade fluctuations. Fresh produce has weather and shelf life. Pharmaceuticals have regulatory timelines that laugh at your planning horizon.
The best IBP practitioners I know don’t force their industry into a textbook framework. They adapt the framework to their industry. They know where the standard model breaks - and they build their process around that reality rather than pretending it doesn’t exist.
The Bottom Line
If your IBP process feels like it’s fighting your business rather than helping it, maybe the process isn’t wrong. Maybe it just wasn’t designed for your reality.
The textbook gives you a starting point. Your industry gives you the constraints. The skill is knowing where one ends and the other begins.
I don’t write these to chase work. I write them because someone should be saying this stuff out loud. Take it, use it, share it - I don’t mind. And if you want more, there’s plenty where this came from at planninglab.co.nz/blogs
#IBP #S&OP