The Analyst Corner: Demand Management

Sensing the future: Next-generation practices in demand management


At various times, at conferences and in conversations, one often hears the usual cynical statements regarding forecasting practices, software and technology: "Yes, so and so company is in trouble," or, "Forecasting yields small returns for the efforts."

Forecasting, in many businesses, has been so problematic that many companies have significantly changed their business models, products and so on. In essence, as Stuart Smith, past vice president of supply chain with Dell Computer, held, if you can't forecast the business, make the business more forecastable. But, the market ultimately decides what you sell, and the gains for even small improvements in forecasting yield big returns in corporate performance.

Part of the problem, though, is that firms look at forecasting as an isolated activity rather than part of an overall set of demand management practices. And as the boundaries of business and technology expand, so do the process innovations, creating a rich set of demand management practices across the whole supply chain, the whole life of the product and the time zones of integrated business events that drive to the outcomes we seek: customer loyalty and profitability. Sounds good; where do I start?

Not that you have to be reminded, but business has significantly changed in the last few years. The four-wall enterprise has yielded to a more dynamic and global model. This means that the solutions designed to support the old model probably won't work so well in the new world (license software was built on the monolithic definition of the enterprise, but that discussion is for another time). At the same time, we are seeing several key technologies come to fruition that will change the way most enterprises do computing, and the new models can significantly revitalize our demand management practices.

In this article we will discuss these changes in business and technology and describe the significant expansion of demand management practices that work. In addition, we will discuss practices that your firm should be developing to significantly improve business performance, based on ChainLink's Future Forward models, which have been validated through our research.

The Digital Essence of All Things

As we globalize, enterprises are moving beyond the virtual models of the late 1990s and are managing their trading partners differently, both on the supplier side and the channel side. These "federated" models rely on a high level of integrated information technology to thrive. Bill Gates' statement regarding the debate on DVD formats — "Understand that this is the last physical format there will ever be..." — makes us think about how we leverage the digital universe to better manage our business. Information availability through network applications, radio frequency identification (RFID) and so on is expanding visibility and at the same time reducing the cost of information technology. (See Figure 1.)

Figure 1

The creation of new dynamic business structures (federated models) that are enabled by, and rely on, these ubiquitous platforms points to a growing capability to understand and access market intelligence for all businesses. In the past there was very little access (without huge investments) to intelligence to understand markets and consumer behaviors. This led to an over-reliance on channel partners, who frequently had no motivation to provide these data. Today this is a huge inertia issue in most industries; face it, when was the last time your firm did its own sensing about what was actually happening in the end-customer market? And if your company has conducted some efforts in this direction, is it a process?

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