What are the drivers of supply chain management?

What are the drivers of supply chain management? These are the questions that most companies raise at one time or another. Supply chain management, in general, is the science of planning for the efficient transport of raw materials from where they are extracted, to where they are finally utilized in production. While this seems like a fairly simple concept, the process in which it is done and why it is done can get quite complex, especially when there are multiple drivers of demand, both short-term and long-term.

Let’s start with the basic premise that is at the core of demand driven supply chain planning. What are the drivers of demand? The answer, at least in a broad sense, includes two major categories of driver: demand creation and demand satisfaction. Let’s take each of these separately.

First, demand creation is the process by which companies make demands for goods and services that are in surplus. For example, an accounting firm makes a demand for cash based on their current and upcoming financial year. The demand creation process is, in a nutshell, the process by which companies establish the price of their products. In a more granular sense, demand creation is the process by which companies measure how much something costs and then allocate a set amount of money to be spent in order to satisfy all of those demands. This is how demand is established.

Now let’s move on to the next driver, satisfaction. This process occurs after the identification of a needs assessment. Needs assessments are the preliminary step of any needs planning process, including supply planning. Through needs assessments, companies determine what those needs are, and then plan to meet them.

One of the key drivers of the supply chain process is demand fulfillment. When a company has identified a needs assessment, the focus turns to planning how best to meet those needs. There are a variety of ways to accomplish this end. Some companies simply plan to make sure that their warehouse capacity meets the demands identified during the needs assessment.

Other companies have a more sophisticated process in place. One of the ways they do this is by analyzing the impact of any increases in supply on the demand for that supply. If there is an increase in the number of units produced, a company can adjust the level of its production to match the increased demand. Or, if demand for the product goes up, they may choose to produce less, in order to keep its output level flat against the rise in demand. In either case, the process involves taking stock of the supply and evaluating whether or not the supply line should be adjusted to take advantage of the increased demand.

Many companies also take inventory of their stocks and identify the physical location in which they are located. They then have processes in place to ensure that they are always in the position to fulfill customer orders. If a company is not in a position to fulfill orders, it could lead to customer dissatisfaction or even worse–back ordering. This could be catastrophic for a company’s bottom line, but it certainly would have a negative impact on the quality and timeliness of the goods or services that were offered. It is important to note that back ordered items would have to be replaced and added to the supply to make up for the additional cost of the back-ordered item, which could have been avoided if the company had been in a position to fulfill orders despite the increased demand.

The final driver of demand-driven supply chain management is the ability of a company to respond to changes in the market. For example, if a consumer reviews on a particular product and gives a negative review, the company needs to act quickly to correct this misinformation before the negative comments are published. The Internet has provided consumers with the means to post reviews of products anywhere around the world, so the need for a company to be responsive to any negative reviews or feedback is even greater. All of these drivers of demand are essential for a company to be successful in their efforts to manage their supply chains effectively.