Supply Chain

Inventory or Customer Demand: Which One Is Guiding Your Supply Chain?

April 10, 2012

As a friend of mine recently quipped, "This process allows your customers to do the talking and your inventory to do the walking." She was referring to demand-driven supply chains (DDSCs).

This is not a fad. DDSC is a transformational strategy because it changes the way organizations think about the marketplace -- replenishment, promotion management, markdowns, and so on, for the end-to-end supply chain. Demand-driven supply chains offer a way to get ahead of the competition by reducing inventory, satisfying customers, and taking care of your organization's bottom line.

To prove my point about demand-driven, let me share an article with you that I read a couple weeks ago in Supermarket News, "POS Drives Replenishment in Food Lion Test"

To summarize, Food Lion is working with is vendors, such as PepsiCo, to "replenish its distribution centers (DCs) and stores by offering them visibility into current and expected consumer demand as reflected by store-level inventory and sales."
According to the article, "the results of the pilot were 'staggering.' Food Lion's DC inventory was reduced between 12% and 27%, DC out-of-stocks were cut between 21% and 77% and store out-of-stocks were trimmed by 20%."

Wow, the numbers speak for themselves. Why keep your capital held up in inventory?

It may require some upfront expenses to get your supply chain operating with demand-driven processes, but in the end you will see fewer headaches and higher profitability, along with better visibility for your end-to-end supply chain.

If you would like to get a fundamental grasp on demand-driven, download this new paper, "Demand-Driven Supply Chains: Getting It Right For True Value."

Need further evidence? Look at the success of Apple, P&G, Amazon, Cisco Systems, and IBM -- all have begun to recognize the opportunity that DDSC provides.

They have changed their operations strategies to focus heavily on demand-driven opportunities and transformed their processes, people, and technologies to execute in superior ways.

Is your supply chain demand-driven? If so, what benefits are you seeing? If you are moving in that direction, what tips can you offer other companies?

Jim
Tompkins Associates

About the Author

Jim Tompkins | CEO

Dr. James A. Tompkins is an international authority on leadership, logistics, material handling, outsourcing, and supply chain best practices. As the founder and CEO of Tompkins International, he provides leadership for Tompkins globally.

His 30-plus years as CEO of a consulting / integration firm and his focus on helping companies achieve profitable growth give him an insider’s view into what makes great companies even better. Listen to an interview of Jim Tompkins on the Business Leader Radio show.

As a high-level business advisor, his unique perspective prepares corporations and executives for the future.

To share his knowledge and provide up-to-date information on supply chain and business trends, he developed the GoGoGo! Blogand Global Supply Chain Podcast.

He has written or contributed to more than 30 books and eBooks, including Caught Between the Tiger and the Dragon, Bold Leadership, Logistics and Manufacturing Outsourcing, The Supply Chain Handbook, andNo Boundaries. Jim has been quoted in hundreds of business and industry magazines such as The Journal of Commerce, Supply & Demand Chain Executive, and FORTUNE, and he has spoken at more than 4,000 international engagements.

Jim has served as President of the Institute of Industrial Engineers, the Materials Management Society, and the College-Industry Council on Material Handling Education, and Purdue has named him a Distinguished Engineering Alum. He has also received more than 50 awards for his service to his profession.