While the concept of demand-driven supply chains is relevant to all industries, the methods to get there can be quite different for different industries, with varying degrees of emphasis placed on demand-side and supply-side initiatives. Despite such a variation, there are many commonalities in the core IT and operational capabilities these companies need to develop.
Key Technology and Operational Capabilities
In order to deploy the mechanisms listed above, whether demand-side or supply side initiatives, there are some key capabilities manufacturers need to implement to become more demand-driven:
Multi-tier connectivity and collaboration:Information is integral to implementing a DDSC, either downstream to distributors and retailers, and/or upstream to contract manufacturers and suppliers. Organizations need to coordinate the design, manufacturing and supply of complex and long lead-time end products within their supply chain network. Visibility into and collaboration with the extended supply network across multiple tiers is essential. CPG companies use such technology to access POS data from various retail customers, while high-tech companies can use it to share demand and supply plans within the extended supply chain.
Data timeliness and granularity: Most companies, who are trying to become demand-driven, need to collect and share data on demand and supply more frequently and increase the degree of data granularity they analyze. For example, supply-constrained high-tech manufacturers require visibility into finished goods and work-in-process inventory at plants, while CPG companies need visibility into SKU-level detail on items in stores, on warehouse shelves and in distribution centers.
Agility and flexibility:The classic elements of flexible manufacturing—such as short changeover times, access to temporary labor and external capacity, and the ability to produce small batches cost-effectively—make it easier to respond quickly to spikes and dips in demand, a key aspect of DDSC success. Agility is a key capability within the extended value chain.
Fast replanning and what-if analysis:With demand volatility, and more demand requiring same-day fulfillment, fast replanning and simulation are of growing importance in all industries. Increasingly, these models are extending upstream and downstream to trading partners to accomplish multi-tier replanning scenarios.
Alignment of metrics and incentives:The ultimate goal of being demand driven is to ensure the best service at the lowest cost. Hence, the performance metrics and incentives of all supply-chain players must be aligned so that everyone is marching in the same direction. The classic silo’ed supply chain organization, where manufacturing watches production economics, distribution monitors finished goods and service, logistics optimizes transportation costs, and procurement primarily evaluates landed material cost, is unlikely to achieve success. Leading demand-driven companies focus on the end-to-end process, and develop a balanced scorecard of metrics to achieve overall competitive advantage.
While the concept of demand-driven supply chains is relevant to all industries, the methods to get there can be quite different for different industries, with varying degrees of emphasis placed on demand-side and supply-side initiatives. Despite such a variation, there are many commonalities in the core IT and operational capabilities these companies need to develop.
