With companies targeting global customers, their supply chains and fulfillment networks have become intricate, multi-enterprise and geographically dispersed. Add to this complexity the constant reality of demand volatility, constrained supply allocations and shortening product lifecycles, and you get a picture of the challenges that demand management and fulfillment groups are facing on a daily basis as they try to ensure the right products are in the right place at the right time.
In short, the best possible plans are made, and then everything unravels when there is a last-minute or unexpected change that needs an immediate response.
Companies are managing demand response across their fulfillment networks by brute force. For too long this critical component of driving the business has been underserved by inadequate tools for visibility, analysis and collaboration. The consequences of poor analysis and slow reaction times are many, from customer erosion to higher inventories to missed earnings.
For brand owners and manufacturers, solving the response management need in their demand management and fulfillment operations represents the largest opportunity to increase customer satisfaction, enhance margins and attain more predictable revenue in the entire value chain. Companies must look to gain fulfillment network visibility and empower their front-line staff to understand true demand and continuously align finished good supply accordingly. By being able to respond rapidly to constant change, companies can gain significant competitive advantages in customer service while driving superior operations performance at the same time.
Responsiveness as a Competitive Differentiator
A strong competency in response management becomes the key competitive differentiator in this hyper-competitive, consumer-driven market. Today, whoever can deliver the product a customer wants, how and when they want it, wins…period. Demand management and fulfillment groups must be empowered to quickly respond to vigorous and volatile demands because if they don't, someone else will. It has never been easier to lose business to a global competitor who is just a mouse click away.
In an environment where the ability to respond to change is at a premium, the challenge to do so is not inconsequential given today's virtual enterprises, which, for a brand owner, can consist of several contract manufacturing sites, regional sales offices, distribution centers and inventory hubs. Demand management and fulfillment teams are forced to manage multiple sources of data all over the world in a multitude of systems, so achieving visibility and coordination in an attempt to manage daily change is no simple feat.
Achieving excellence in responding to changing customer demands has become the No. 1 challenge facing companies today; hence, a strong competency in response management can become a valuable competitive advantage.
An End-to-End Solution
There are several "point solutions" available that focus just on demand management or order management, which can provide improvements in isolation; however, companies need a collaborative solution that supports the dynamics of forecast, order and supply changes within a single integrated fulfillment network.
Despite investments in demand planning, supply chain planning (SCP), and sales and operations planning (S&OP) tools, demand management, sales and customer service organizations often end up relying on spreadsheets, which don't afford timely updates of multi-enterprise information and are hard to use in a collaborative analysis environment. The fact that user communities have tried to employ spreadsheets to address business challenges is quite frequently a sign that the company is struggling to deal with unexpected change. As a result, demand management and fulfillment teams "throw bodies" at the problem and/or become dependent on escalating their issues to manufacturing operations, which then puts a drag on both groups.
While better forecasting is one step toward resolution, leading companies need to also excel at their ability to meet objectives when the forecast is not accurate. Demand volatility guarantees that even the best demand and supply plans are inevitably out-of-sync. Given the number of changes that occur inside the sales and operations planning the S&OP process produces a plan that organizations can rarely, if ever, make work. Companies are finding that you can't "plan" the customer and, as a result, demand management and fulfillment teams continue to be faced with the challenge of responding to unpredictable changes in customer requirements.
So when existing tools are inadequate and more investments in planning are not the answer, what is? The key for demand management and fulfillment teams is to find a solution that provides an integrated view of both demand and supply, since constant tradeoffs and compromises will be required in order to deal with the frequent misalignments that occur daily. Most demand management and fulfillment organizations lack the information and tools to be empowered to act on their own and achieve their goals quickly.
Empowered to Act
To achieve superior customer service and revenue attainment in an environment of constant volatility, demand management and fulfillment teams need to be armed with a response management tool with the flexibility of Excel, the scalability of an enterprise application and a combination of personal alerting, multi-enterprise visibility, collaborative analysis and rapid decision support capabilities.
Alerts to projected misalignments in demand and supply (e.g., forecast change beyond tolerance, late demand impacting quarter-end, supply disruptions, late customer orders, etc.) can enable demand managers and order fulfillment staff to quickly re-align supply and/or engage manufacturing operations to best satisfy customers and meet revenue/margin goals.
A single view of the truth
Integrating demand and supply data from multiple sources (including customer relationship management, enterprise resource planning, demand planning tools, supply chain management tools, spreadsheets and point-of-sale data) into a single integrated source, organized by role-based views, can ensure each stakeholder sees all the information pertinent to their specific function.
Comprehensive information readily on-hand allows for a more efficient process of capturing and consolidating customer sales forecasts from disparate systems and sites. Quick consensus forecast development — with internal and customer collaboration — will speed demand sensing and more profitable demand responses.
Iterative modeling capabilities can allow demand management and fulfillment teams, both inside and outside the enterprise, to simultaneously propose, detail and share the impacts of countless "what-if" action alternatives to quickly identify the best operational actions to drive rapid response. Integrated performance management capabilities can proactively evaluate the impact of all decisions against the achievement of sales and operations planning and other targets.
As demand management is inherently a collaborative process, it requires active participation from a number of key decision makers. Thus, a key component to any solution is the ability to automatically detect who in the organization could be impacted by or could provide insight to a proposed action, thereby ensuring the right people are quickly engaged in formulating responses. By engaging the right people, response times are shortened and actions more accurate.
Breakthrough in Customer Service and Operations Performance
Empowered with visibility, analysis and collaboration capabilities, demand management, sales and customer service decision makers can quickly sense demand and supply misalignments and drive more profitable responses by shaping demand and rapidly allocating finished goods supply accordingly. Ultimately, response management in the context of demand fulfillment will drive breakthroughs in customer service and operations performance.
Customer satisfaction results will be driven primarily by:
- Speed of vendor response to information and status requests
- Better support for review of alternate scenarios
- Better fill rate
- More flexibility to change orders, order mix
- Reductions in inventory shortages due to improved forecast accuracy
Financial impact will be driven primarily by:
- Reduced administrative overhead for order management
- Reduced cost of lost sales/obsolescence
- Higher customer retention rate, share-of-account
- Reductions in inventory excess
- Reduced storage cost, inventory holding cost, and, in the extreme, reduced capital cost from lower investment in warehouse and/or factory space
As companies seek ways to thrive in the face of constant change, a strong competency in response management can empower customer-focused companies to gain a unique competitive advantage. By outperforming on the basis of responsiveness, a company can turn the industry's No. 1 challenge into its area of strength.
About the Author: Randy Littleson is vice president, marketing, at the on-demand response management solutions provider Kinaxis. www.kinaxis.com.