From SCM to DCM

Companies shift emphasis from supply chain to demand chain management to optimize flow of goods

Boston  November 5, 2002  After squeezing maximum efficiency out of their supply chains, many companies are refocusing on the demand side by adopting demand chain management (DCM) solutions, according to a new report from technology consultancy The Yankee Group.

In its new report, "The Strategic Opportunity for Demand Chain Management: Key Processes Defined," Yankee suggested that the strategic high ground is shifting from optimizing materials coordination through supply chain management (SCM) to optimizing the flow of finished goods and transferring market demand back into the supply chain through DCM.

Companies are looking at solutions ranging from demand forecasting to revenue management as they focus on the intelligent distribution of finished goods and services, Yankee said.

"Managing the demand chain from manufacturers to distributors to retailers  and all the tiers of suppliers and logistics service providers between  is a daunting task," noted Kosin Huang, a senior analyst with Yankee and author of the new report. "Companies will continue to optimize only the key demand chain processes within their immediate control."

Huang continued: "Total optimization of the demand chain requires a common set of goals that likely does not exist. Companies that can address immediate demand management concerns, whether it spans demand stimulation, capture, interpretation, or fulfillment, will enjoy a significant competitive advantage."

In the report, Huang examined the various intersections of supply and demand and the emerging class of software that serves the functional requirements for demand-based management.

The analyst found that today's customer-facing processes lack synchronization with operations and supply chain responsiveness. As a result, there are potential strategic and operational optimization opportunities. DCM offers a promising suite opportunity, but the cost-benefit of implementing components of a DCM solution still varies greatly, Huang found.