What is a Demand-Driven Supply Chain?
- June 14th, 2012
- By: Loraine Lawson
What if, instead of using past sales to determine what quantities you should buy from certain suppliers, your customers could just tell you what they plan to buy ?
Wouldn’t that be easier?
Traditionally, supply chains have been very, well, supply-centric. A manager orders the supplies, the supplier makes them, and off they go through the supply chain. But increasingly experts are talking about a new model: The Demand-driven supply chain.
A recent blog post by George Nielsent explains three core differences between traditional supply chain management and on-demand supply chain management. Neilsen is the Internet Marketer for Fishbowl, an inventory management software company that integrates with QuickBook.
Neilson says it boils down:
- Knowing what customers will buy, rather than what they have bought.
- “Pulling” products to sales rather than pushing products to market.
- Supply chains that deliver to the customer the fastest, rather than a lean warehouse.
On-demand shouldn’t be confused with just-in-time manufacturing, where the trigger points still resides within the supply chain. This is all about allowing actual customers to trigger movement in the supply chain.
Let’s look at some of the key traits for a demand-driven supply chain:
- Visibility across the entire chain with near real-time availability.
- A supply chain that includes multiple parties, multi-echelon supply networks. Buyers and suppliers must share visibility and collaborate.
- KPIs that focus on customer service, product availability and margins.
- Inventory management focuses on speed, rather than storage.
Although demand-driven is not strictly about technology, it obviously requires a complex technology foundation with deep integration between customer relationship management and supply chain management systems.
It seems to me a demand-driven supply chain would also, by necessity, require a data-rich environment, with heavy investment in near-real or real-time analytics.
I also suspect the demand-driven supply chain is tied to another emerging trend: The data-driven business. Nine out of 10 executives now say their organizations are focused on using data to drive business decisions, according to Capgemini.
Managing by data is only going to be effective when all the parts of the organization can respond quickly and effectively — including the supply chain.