I stumbled across an excellent article by Tompkins International, a global supply chain consulting firm – and I just had to share it. Most manufacturers have applied inventory control techniques and lean manufacturing principles, but there’s a paradigm shift that will separate the supply chains that fail from those that will continue to succeed in the future.
A quote taken from their report below explains this beautifully:
“Developing a ‘demand-driven business’ is an emerging goal of business leaders. Knowing what customers bought yesterday and what they want to buy today is not enough. Due to the increasingly global economy, shorter product cycles fueled by instantaneous information, and increasing specialized needs of global markets, the common views about supply and demand are no longer adequate.”
Gene Tyndall, EVP – Global Solutions, Tompkins International
The paradigm shift has to do with the demand-driven approach and the traditional approach to supply chains. Keep in mind that the traditional approach is by no means obsolete – in fact, it still works quite well in the manufacturing industry. However, to maximize profits and compete with high-caliber competition, demand-driven principles need to be applied. Here’s a snapshot of the two approaches:
Traditional Supply Chain Management
- Knowing what customers bought yesterday and today – When you fire up your inventory management system in the morning, you can see the real-time data inflows and outflows. Anything less than this is inadequate.
- “Pushing products to markets” – This methodology involves making product-launch decisions based on incomplete data. Not knowing what products are truly being bought in the market can cause inventory waste and revenue loss
- Adaptability – A lean warehouse should have the ability to adapt to demand, but how quickly it can react is the key.
Demand-driven Supply Chain Management
- Knowing what they will buy – Using past data trends and market research gives the edge in predicting emerging demand.
- “Pulling products to sales” – A warehouse’s outflow should fit the markets demand like a puzzle piece. Using an inventory management system is the best way to make this happen.
- Velocity – He who fills customers’ needs fastest wins.
Is becoming a demand-driven manufacturing organization out of reach? Many manufacturing companies can relate to this quote:
“Chief Supply Chain Officers (CSCOs) and other senior executives across all industries must now react to volatility and unpredictable events more than ever before. Many relate that their operating plans are impacted even before they reach a steady state, that capacities are either over or under-utilized, that product inventories are either excessive or out of stock, and that flexibility is elusive no matter what they do to prepare for it.”
No, it’s not out of reach, but it takes planning, preparation, and the right technology. The preparation process needs to be extremely thorough – every process needs to be mapped out and examined. Bottlenecks and other potential problems need to be planned for.
A state-of-the-art inventory management system is needed to manage and track all of your data. The warehouse manager needs to be able to see the status of all inventory in a few clicks within the dashboard.
Management and personnel need to be onboard and understand the synergy that’s needed to have an advanced supply chain. Once the demand-driven paradigm is adopted and implemented, then that organization will likely enjoy success in its market for years to come.
(Gene Tyndall, 2012) Demand-Driven Supply Chains, Tompkins International