External Demand Collaboration
APQCs Open Standards Benchmarking data indicates that organizations engaging in external demand collaboration with customers obtain better performance on key supply chain planning metrics. Table 1 compares the performance of organizations with a low amount of external demand collaboration (a rating of one or two on the five-point scale) against the performance of organizations with a high amount of external demand collaboration (a rating of three or four on the five-point scale) with regard to two metrics.
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As Table 1 shows, organizations that engage in more external demand collaboration with their customers have inventory carrying costs half that of organizations that conduct less external demand collaboration. Organizations that conduct less external collaboration need more than twice as many full-time equivalent (FTE) employees per $1 billion in revenue to conduct supply chain planning than organizations that collaborate more with their customers on external demand planning. The expanded view of a product market provided by external demand collaboration allows organizations to carry less safety stock and reduce the number of FTEs needed to conduct supply chain planning.
APQCs data shows that there is room for organizations to improve their S&OP programs. In addition to expanding the use of meetings with sales, marketing and supply chain operations that make up the backbone of a formal S&OP program, organizations can initiate external demand planning programs with their customers. By integrating the customers perspectives into the supply chain planning process, organizations can reduce inventory carrying costs and the number of employees needed to create and update supply chain plans.
APQC is a member-based nonprofit and a proponent of benchmarking and best practice business research. Working with more than 500 organizations worldwide in all industries, APQC focuses on providing organizations with the information they need to work smarter, faster and with confidence.
