Supply Chain Component Needs Consideration in Demand Management Processes

In its simplest form, demand management refers to the process whereby businesses utilize various indicators to forecast customer demand, and align its supply chain to meet those projections.  Now obviously there is no guarantee that demand management is going to be successful every time, but for many businesses, it has proven to be a reliable way to manage inventory and planning systems.

While some have likened demand management to “management by crystal ball,” the concept is actually quite complex, and involves the synchronization  and integration of many different parts, with technology being the glue that holds everything together.  A recent survey by Griffin Strategic Advisors, reported on by Supply Chain Management Review, found that just about half of businesses believe that their supply chain is adequately integrated with their technology function.  In fact, 25 percent of survey respondents said that they were not integrated at all.

This is particularly important, since responsibility for demand management most often falls to the supply chain function.  According to the Griffin survey, demand management responsibility tends to be assigned as follows:

• Supply Chain – 33 percent
• Operations – 21 percent
• Sales – 18 percent
• Procurement – 14 percent

So while businesses are increasingly assigning responsibility for the demand management function to supply chain managers, they are generally not taking steps to provide the visibility/technology necessary to evaluate all of the business’ moving parts.

Another surprising finding of the survey, only 17 percent of respondents said that their logistics/transportation function was “very involved” in demand management.  As the survey authors point out: “Regular input around supplier issues, capacity and mix, transportation or warehousing constraints, for example, are invaluable for a solid demand plan.  Similarly, logistics needs accurate and timely input to execute against the demand plan.”

Businesses that fail to factor logistics and transportation into their processes could be in for quite a surprise.  The transportation industry took quite a hit during the recession, with an estimated 3,000 carriers either absorbed by larger companies or forced out of business altogether.  This contraction in capacity, along with a serious shortage of drivers, could cause some businesses to have trouble locking in service.

Businesses that find demand management to be most helpful are those that integrate all functions into the demand management process – especially logistics and transportation.  By ensuring that all areas are looped into the process, a business can help ensure greater efficiency and results.