Demand Signal Repository: Foundation for demand driven supply chain
Demand Driven Supply Chain: Characteristics & Benefits
Posted By: Supratik Ray, Principal Consultant, Manufacturing
Supply chains today are becoming more complex as companies today expand their geographical footprint and leverage outsourced manufacturing and operations. The consumers today on the other hand have multiple choice of fulfilling the demand due to increasingly similar product offering and penetration of multi-channel retail. The changes in supply complexity and demand variations are transforming the traditional forecast & push based supply chain to pull or demand driven. The key characteristics of a supply chain driven by demand driven:
1. Material movement based on actual demand or consumption
2. Real-time visibility of demand & supply across the chain.
3. Single demand signal shared with all the tiers in the supply chain.
4. Having inventory at right stage and right quantity at right.
The benefits of a supply chain driven by demand:
1. Reduce or eliminate stock out situations
2. Reduce safety stock and left overs / obsolescence.
3. Reduce stock and inventory cost
4. Improved promotions effectiveness
Demand Signal Repository: Foundation for demand driven supply chain.
One of the key enabler to a demand driven supply chain is removing information latency across partners of the supply chain and having single view of the supply and demand position. Demand signal repository (DSR) is the key enabler is getting a harmonized view of data from external and internal systems. DSR is an important building block of the demand driven supply chain and serves the following purpose.
1. It is a central database for all demand. It stores demand from all sources like point of sale data, store & distribution center inventory, retails forecasts & events.
2. Harmonizes internal line of business data like sales, shipments and forecasts along with external data for analytics.
3. Create a multi-dimensional analytic model using data from 3rd party sources like syndicated data, maps and other consumer information.
4. Improve cross functional analytic tool to support business monitoring and pro-active decision making for supply issues.
The picture below illustrates the downstream data analysis and planning without DSR.
The picture below illustrates real time supply chain with DSR.
Demand Signal Repository: Benefits and challenges
The advantages of DSR driven demand driven supply chain:
1. Improved forecast accuracy by having demand & supply position in a single repository and having a semi-real-time inputs for improving forecasting accuracy.
2. Improved cash flow by reducing inventory. Right quantity and right place and right product phase.
3. Improved promotional efficiency with integrated analytics for cross functional analysis of promotional spend & performance.
4. Cycle time reduction for new product introduction due to availability of semi real-time data for sales across retail channels and consumer response to promotions.
The demand driven supply chain lots of benefit it also comes with its own set of challenges:
1. Fragmented IT landscape across the supply chain and disparate usage of same data elements by different partners.
2. Willingness of distributors and retailers in the supply chain to collaborate.
3. Schedule adherence to share data to have a compete view of the demand and supply position.
4. Executive sponsorship to adopt and demand driven as culture rather than tool or technology.
Industries like consumer goods which have typically shorter product launch schedule; strong regional channel preference and high demand variability have seen improvement in improvement in forecast accuracy and improved insights for new product introduction. Industries with long lead time or inventory at different stages are able to make better decisions on reducing supply chain inventory.
Though there are challenges in orchestrating a demand driven supply chain many industries are seeing the benefits and adopting DSR to achieve a demand driven supply chain. The proliferation of information technology across the tiers of supply chain, shortening product life cycles and multi-channel retail are going to increase the adoption by retailers and manufacturer.