Understanding Demand Driven Supply Chain Strategies
A Demand Driven Supply Chain describes a global process characterized by a strong focus on demand, ensure smooth supply chain performance and minimize inventory holding times. A company’s internal Demand Driven Tool implementation can provide an organization’s ability to leverage its existing resources to drive business success. The primary components of this powerful supply chain are leveraging supply ENDPARAM
A Demand Driven Supply Chain (DDP) is a global strategy based on a principle that demands are dynamic, competitive and often inconsistent from time to time. In short, a company must anticipate demand and plan for changes in the markets where they are based. One of the key components of the DDP is the Demand Driven Requirements Planning (DRIP), which is a formal specification that defines anticipated customer requirements. This formal specification can be used by businesses to obtain cost savings and to monitor and measure their capabilities to provide a competitive edge.
An important aspect of DDPs is that they are driven by market conditions. This means that no matter how great a company’s management team may become, if the market is moving against them, they will still have to adapt. As such, most companies with supply chains implement DDPs as part of a long-term strategy, in order to mitigate any short-term impacts. However, some companies use DDPs to gain a competitive advantage by being the first to implement new technology or to gain market share by investing in new or different supply chains.
The major benefit of DDPs is that they reduce operational costs by improving productivity, reducing waste and streamlining operations. However, in practice, the benefits of a DDP are sometimes limited by a lack of cooperation between the supply side and the demand-side. Often, this is because one party is more technically talented or has deeper pockets than the other party. Similarly, because the supply-side may be more willing to invest its money in a particular process, it may not be willing to make the technology available at a lower price to its competitors. In addition, the longer a company makes its operational capabilities more outdated, the higher its maintenance costs will become.
Another major challenge faced by most companies when adopting a DDP is how to ensure that their investment in new technologies is worthwhile. Many large corporations spend millions of dollars per year on R&D, in order to discover new technologies that can improve their bottom line. Unfortunately, there is very little that these large corporations can do to assure that the technology they invest in actually produces real, positive return on their part. Instead, they must rely on their massive buying power, which often brings problems of its own. Especially when these technological innovations hit the consumer market, they may not be ready to make the technology available at a lower price, despite the obvious benefit to them.
The key to successfully integrating the supply chain Skills and the demand-side is for companies to develop an effective partnership. The two parties must somehow cooperate in order to maximize the benefits of DDPs. The challenge, however, is not that merging the two doesn’t work – it’s that businesses don’t know how. Most companies still expect their DDP partner to solve all of their long-term supply chain problems, solve the customer problem, and then run the business side of things. Although this may ultimately prove to be true, businesses need to stop seeing DDPs as a solution to all of their problems, and instead view them as a tool that can help them identify and overcome short-term obstacles to growth.
