What is a demand driven supply network?
Demand driven supply chain (DDSC), also known as demand-driven supply network (DDSN), is a system of technologies and processes that sense and react to real-time demand across a network of customers, suppliers and employees, this has been significantly enabled due to the rise in the use of e-commerce systems and new technologies due to the onset of the Internet of Things (IoT).
In a traditional supply chain, inventory or services are provided based on a forecasted demand and historical sales patterns, however, in a demand driven supply chain companies that form part of the supply chain work closely to shape market demand by sharing and collaborating information so avoiding time lags in information flow, with a view to avoiding the bullwhip effect occurring across the supply chain.
A demand driven supply chain focuses on the demand from the consumer data and feeds this data through to the supply base so driving greater efficiency into inventory availability giving a demand-pull technique.
Source: Boston Consulting Group
What are the drivers of a demand driven supply chain?
Consumers and technology are main drivers of a demand driven supply chain, consumer expectation of speed of supply is becoming more significant and companies that are enabling themselves with technologies that can deliver speed to market from stock availability are gaining competitive advantage. Therefore ensuring anticipation of demand is being driven by good data management and the responsive abilities of the supply chain.
Tech is playing a significant part in demand driven supply chains, imagine data-driven from weather predictions that your organisation can leverage to ensure you have sufficient inventory levels of wellington boots, umbrellas or sunscreen at the right time that a consumer has a demand, and the ability to ensure that you do not carry high levels of inventory that tie up cash when demand drops. Good data and the ability to leverage that data to drive efficiencies down the supply chain will support good practices and efficiencies across the supply chain.
New technologies such as drones and 3D printing will also play their part in a demand driven supply chain with the ability to increase the speed of manufacture and delivery, with a reduction on resources and an increase on meeting consumers expectations and service level.
What are the challenges of a demand driven supply chain?
At the time of writing, technology investment possibly remains the largest inhibitor of operating an efficient demand driven supply chain, companies that have failed to invest in technology or have fragmented systems will lack the ability to transfer data at the most efficient speed, and in return, this restricts the speed at which the five rights of procurement can become maximised.
Organisations that focus on cost reduction and operating costs rather than customer experience will inhibit their ability to implement the most effective operating system. The benefits of cost reduction and reduction in operating costs is leveraged from the implementation of a successful demand driven supply chain but should not be the main driver, whilst the desire to operate a demand driven supply chain should be a leadership decision that supports the companies strategy.
Potential advantages of a demand driven supply chain?
- Increases in sales
- Improved market position
- Improvements in demand forecasting
- A reduction in inventory levels therefore and increase in working capital
- An increase in order fulfilment
Operating a demand driven supply chain brings the elimination of inefficiencies and constraints.
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Demand Driven Supply Chain
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