Managing Demand Driven Supply Chains

Not so long ago those at the top of the supply chain were the source of demand, a push-driven process where demand could be carefully managed and contained. With a complete shift in the global marketplace, and with the advent of the digital age, this traditional supply chain structure has been largely turned on its head.

Demands in the supply chain now come much more vociferously from the bottom. What we see now is a pull-driven supply chain where the customer says “jump” and the ripples cascade upstream in the supply chain. This poses a significant challenge for anyone involved in supply chain management. Knowing how to deal with customer demands in the supply chain in a way that not just survives volatile demand, but actively thrives on it can be a little like rocket science.

How to deal with Customer Demand Volatility

By its very nature, customer demand and its ensuing volatility, get passed up and down the supply chain rather like a yo-yo, frequently gaining momentum with each stage passed. However, it is not something to run from. It is possible to deal with demand volatility in a way that is not only cost-effective but also improves customer service.

In order to deal with customer demands in the supply chain you need to consider the chain in its entirety, not just the customer element. The aim is to develop a responsive chain whilst not creating too much wastage. It is very much a careful balancing act.

Tools for Dealing with Customer Demands in the Supply Chain

Various tools can be employed to help you manage customer demand. Predominantly, all are aimed at increasing flexibility. Loren Troyer, the Customer Demand Director at John Deere, has explained how flexibility is crucial (see: Supplychainbrain) and that the unplanned and the volatile is now the norm for supply chains.

So, how do you increase the flexibility within the supply chain?

  • Buffering: Within the supply chain consideration needs to be given to the creation of buffers at three distinct points – supply, inventory and capacity. Processes need to be examined to assess whether it is possible to hold enough inventory to meet surges in demand without too great a strain on resources, costs and time. Care especially needs to be taken when a product has a short lifecycle. Decisions also need to be taken about exactly where the buffering should happen: with the finish goods or with component parts, for example.
  • Reducing Cycle Time: With a well-oiled supply chain it is possible to increase the speed of transition through the supply chain. In so doing it has the potential to be more responsive and achieve greater flexibility.
  • Time-Holding: Expectations of the customer can sometimes be managed effectively by having planned for strategies that can swing in to action. Having a predicted scenario of trouble meeting customer demand can sometimes be assuaged with careful PR and managing expectations. For example, a new piece of technology seeing sales exceed anticipated demand can launch a second generation that appears slightly different from the first, on the back of the previous product launch.
  • Collaboration: Often the problems with managing customer demands happen as a result of poor communication between the different links in the supply chain. Each element of the chain operates in isolation and this means that valuable information from one takes a long time to trickle to where it needs to be. With improved collaboration and relationships in the supply chain it is possible for visibility within the chain to be improved which can aid demand forecasting for everyone.
  • Self-Management: By having your own house in order you are more likely to be responsive when a shift in demand occurs. Knowing exactly how your part of the chain can respond, and ensuring automation within your element, means that when the buck gets to you things don’t stop but in fact speed up. This in turn should help with collaborative relationships.

Customer Demand and the Future in Supply Chains

It seems inevitable that the voice of customer demand is going to get increasingly louder and more imperative as time goes on. With the development of eCommerce into the next generation, consumers are ever more savvy but also demand is increasingly volatile. A supply chain has to be capable of responding and delivering in a timely manner that meets and satisfies the customer.

By honing the entire supply chain and working collaboratively it is possible to meet customer demand and prove yourselves worthy of a 21st century supply chain. The companies that not only survive, but thrive, will be those that are flexible and responsive in the face of volatile customer demand.

If you would like to discuss how to improve your supply chain please contact our experts today.

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