The New Nation - Internet Edition

IT DESK REPORT

Most supply chain projects in the past have focused internally on reducing operating costs through inventory reductions, better transportation planning, lower transaction costs and improved supplier management.

However, industry-leading companies are transforming their supply chains externally to be demand-driven with the key objectives to grow revenue and profits.

Shouldn't all supply chains be demand driven? Absolutely, it is not by accident that many of the best suppliers to top retailers are leading the transformation into a demand-driven industry.

These companies have five best practices in common. Those are,

1. Collaborate internally and externally.

Collaboration is the most critical step in any effort to improve demand visibility and the ability to use this increased visibility constructively. It allows suppliers and customers to communicate insights on planned promotions, extraordinary events, capacity constraints, new product introductions, operational problems, and other issues that are not covered by electronic data interchange transmitted orders and shipping notices.

2. Use every source of data.

The internet and today's powerful network computers have made it possible to acquire and analyse the huge volumes of demand data including POS data, sales history, consumer demographics, syndicated data, RFID, and other sources. In addition to supporting forecasts that are more responsive to demand changes, using the POS demand streams provides the best foundation for another best practice: the one-number plan.

3. Use intelligence, not algorithms (in supply chain applications).

Algorithms costs a lot to build yet ultimately don't work fully automated. Using increased demand visibility, precise forecasting technology, and collaboration, industry-leading companies are empowering their planners, not attempting to replace them with automated software.

4. Create a real sales and operations planning process.

A "real" S&OP process is one that allows all departments to contribute to developing and executing the annual and monthly plans, including enabling sales, marketing, and finance to actively participate in the process; monitoring progress toward the goals set forth in the annual operating plan; initiating demand-creation activities when the current forecast is falling short of the operating plan; incorporating inputs from customers through collaboration; and increasing demand data sources to ensure that right quantities of the right products are in the right place.

5. Focus on process excellence, then technology.

Common weaknesses include the inability to: develop accurate forecasts at a more granular customer or location level, integrate promotion lift factors into program forecasts, and make systems more responsive to increased demand visibility and handle more granular data. Fortunately, these capabilities can be added to existing enterprise resource planning systems with less difficulty than in years past. Better software platforms, common messaging protocols, and user interfaces mean that the weaknesses listed above can be addressed in months, not years.

Essentially, these five best practices make it possible to increase demand visibility, make better decisions with this information, and ensure that the new collaborative processes are scalable and repeatable to sustain revenue and profitability gains.

The real good news is that much of the technology required to transform any company to be demand-driven is already in place at many organisations. By adding a relatively light layer of additional planning software, your company can be on its way to becoming demand-driven. The combination of increased demand visibility and precise demand management yields a return on investment faster than many other information technology projects.

-Article By Hafeez Ullah Irfan