In my previous post, I defined the demand-driven supply chain by outlining the differences between a traditional supply chain and a demand-driven supply chain (DDSC). In today’s article, I’ll turn my attention to building a demand-driven supply chain.
A demand-driven supply chain management process, no matter the industry, is built based on some fundamental principles. These principles are applied taking into consideration the requirements of the particular industry or company involved.[Read Previous: What is a Demand-driven Supply Chain? ]
Fundamentals of Building a Demand-driven Supply Chain Management Strategy
- Visibility: One of the major requirements of the DDSC is complete visibility and transparency over the supply chain. Demand and inventory levels at every tier must be accessible by all entities involved in the process. This may present an issue regarding security and may open debates about accessibility, but the right technology and infrastructure can satisfy all such doubts. Transparency across the supply chain ensures that no one entity is entirely accountable for changes to the supply in response to demand changes. It will provide a methodical path, where everyone can see the actual changes in real time, to enhance supply chain performance.
- Technology & Infrastructure:
Infrastructure plays a key role in any supply chain. This is even more essential in demand-driven supply chains since informational flow and communication technology is the foundation of such a supply chain. Local networks, IoT networks and even new technology such as blockchains can be incredibly effective in relaying changes in demand to planners and managers with minimal delay. Third-party software can come in handy in complex data analysis of demand and will provide digital environments for collaborative work. Apart from technology, there would be a need to reorder current operations to fit the mold of a DDSC network. Raw material suppliers, production equipment, and logistics set-up would have to be analyzed and changed to assume the roles dictated by the DDSC
- Collaboration: A DDSC is built on collaborative work. Constant communication between all tiers of the chain is integral to respond to the multitude of changes in demand. Supply planners and Demand planners must work in tandem with each other with inputs from higher management as well as constant updates from the warehouse and factory floor staff. Employees must be trained to anticipate sudden changes in the working order and be able to adapt the resources available to deal with the changes. This could entail a complete restructuring of the employee and labor staff, but such a move would result in cost-efficient operations.
- Detailed Demand Analysis: The changes in demand are amplified as we move up the supply chain. Therefore, detailed analysis of the demand data at the SKU level is the most important step to ensure the success of a DDSC. Supply chain planning software solutions such as Arkieva provide demand analysis capabilities such as demand segmentation, variability analysis, Pareto analysis, among others to improve the accuracy of forecasts. Furthermore, these functions may be automated over set parameters to account for continuous changes in the demand trend.
There you have it, the “holy grail of supply chain” – the demand-driven supply chain. While it is not a simple task to convert a traditional supply chain into a DDSC due to the time and monetary investments required, the total cost savings make the change worthwhile.
Are you currently using a demand-driven supply chain process or considering moving to one? What are some of the challenges or observations that you’ve made along the way?
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