The Right Way to Mix and Match Your Customers

“The costs of demand variability can put you out of business.” That blunt assessment, recently offered to us by the director of sales and operations planning at a Fortune 500 company, reflects what managers already know: Peaks in demand can drive high overtime costs, stockouts, and lost sales, while slowdowns leave capacity idle and increase excess inventory. The impact on customer service levels — not to mention the bottom line — can be significant. But how can companies best manage this variability, especially when deciding which potential new customers to target?