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Even Steven

A balance between supply and demand is essential to your company's well-being.
3 min read

This story appears in the August 2008 issue of Entrepreneur. Subscribe »

As a Marine Corps pilot in Vietnam, I was acutely aware of the balance between supply and demand. Stationed on an aircraft carrier, we had to order supplies from warehouses on land. It was frustrating to regularly receive aircraft parts for the wrong model of aircraft. My commanding officer wasn't interested in my problems with the supply chain; all he wanted was for my gunships to be ready when he needed them. Because the Army had a large supply of parts in its aircraft graveyard, we often kept our fleet flying by borrowing parts from the Army. Although this didn't follow Marine Corps directives, we kept our aircraft in the air with or without parts from our own supply chain.

One very important job of an entrepreneur is to coordinate the forces of supply and demand in his or her business. If there's too much supply, or inventory, the business suffers. If there's too much demand and not enough supply, the business also suffers because the customers aren't being supplied with what they want and may go to a competitor. If there's no demand or supply, the business will soon be out of business.

Think of demand as sales and marketing. It's your sales and marketing department's job to create demand by making sure your customers know and buy what your business has to offer. Meanwhile, supply is represented by manufacturing, warehousing and distribution, aka the supply chain. It's your supply chain's job to be prepared to fulfill the demand created by the sales side.

In my businesses, I divide my responsibilities between supply and demand. As a business grows, I appoint one person to be solely in charge of demand and another person solely supply. This reduces a lot of the finger-pointing, buck-passing and shoulder shrugging that happens when supply and demand aren't in harmony. If there's too much supply (inventory) and not enough demand (sales), both sides come to the table to discuss it. The beauty of including both sides is that everyone realizes it is one business. Problems have a better chance of being resolved when each side understands the other and realizes they share the same goals.

In Vietnam, I never had the opportunity to meet face to face with the clerk who shipped the wrong parts and explain how important his job was not only to the aircrew, but also to the troops on the ground. My experience with supply and demand in Vietnam has made me a better entrepreneur today. And every business can benefit from aligning these two critical components.

Robert Kiyosaki, author of the Rich Dad series of books, is an investor, entrepreneur and educator whose perspectives have changed the way people think about money and investing.

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