Establish supply chain visibility into your multi-enterprise, multi-tier supply chain.
- Dynamic demand management is very much a function of knowing what is where and what state your supply chain is in at any moment. Companies need easy access to real-time supply chain information in order to understand the opportunities for shaping demand and allocating (or reallocating) finished goods supply accordingly.
- Visibility means the integration of demand and supply data from multiple sources, including customer relationship management (CRM), enterprise resource planning (ERP), demand planning tools, supply chain management (SCM) tools, spreadsheets and POS data, creating a single integrated view of forecast, sales orders, inventory and supply.
2. React FasterUpdate forecasts more frequently.
- In an environment of high variability, traditional monthly planning cycles do little to provide accurate direction from a daily perspective.
- A reconciliation of supply and demand plans needs to be done on a more frequent basis. For example, with the decrease in housing starts, Hubbell Lighting faced a precipitous drop in demand that required them to complete daily supply chain runs to continually reconcile demand plans to the current reality.
- Define clear operations performance thresholds and activate an alerting process to proactively notify decision-makers of exceptions that could have a negative impact on the business.
- Automated solutions can sift through all the activities, uncovering the truly important information and understanding the domino relationships and cumulative effects of multiple events.
- Shortening the time to know about a problem drives faster response and reduces the magnitude of any impact.
Respond immediately to reduced or cancelled demand.
- It is critical that companies react to unplanned cancelled demand with equal fervor as when trying to meet an unexpected new order.
- When the customer cancels an order or reduces forecast, many times the customer service representative (CSR) removes the order and that's the end of it. The problem is the business has already invested in the demand by building at some level to forecast, making commitments to suppliers or executing on pull-based replenishment based on now-outdated demand. The business does not feel the pain until the end of the quarter when there is excess inventory on the books (see sidebar "The Inventory Discussion" for further discussion on inventory).
3. Bridge the DivideKnock down the internal silos.
- Ensure that demand and supply are looked at together — by everyone. For years, organizations have been created with separate demand planning and supply chain planning teams, with tools designed for each of their needs. The new need is to integrate these efforts more closely together to ensure that everyone sees the immediate impact of demand on supply and vice versa.
- Individual groups need to take a more holistic and real-time view of the interdependencies. A key part of this process is the ability to simulate various demand-supply scenarios and their associated action alternatives to increase preparedness for the various possibilities that may unfold or have unexpectedly taken place.
- Some companies call this "demand co-planning." The basic notion is that you need to move from a handoff process to a collaborative one, where you and your customers are collaborating more regularly on their demand requirements. This should be a core part of your demand planning process because latency and intermediaries add more risk to the process.
- Determine which customers represent the bulk of your business, which customers exhibit the largest or most frequent changes in demand, and which customers provide you with the most profit. These are the customers with which it should be your priority to collaborate.
- Co-planning and response at both ends of the supply chain help to mitigate the ripple effect of demand volatility.