Demand Driven Supply Chain

A Demand-driven supply network (DDSN) is one method of supply chain management which involves building supply chains that are responsive to varying demand signals. The main force of DDSN is that it is driven by customers demand. In comparison with the traditional push supply chain, DDSN uses the pull technique. It gives DDSN market opportunities to share more information and to collaborate with others in the supply chain.

DDSN uses a capability model that consists of four levels. The first level is Reacting, the second level is Anticipating, the third level is Collaborating and the last level is Orchestrating. The first two levels focus on the internal supply chain while the last two levels concentrate on external relations throughout the Extended Enterprise which is achieved by ERP applications extending through partners supply chains.

In Demand driven chain, customer activates flow by ordering from the retailer, who reorders from the wholesaler, who reorder from the manufacturer, who reorder raw materials from the suppliers. Orders flow backward, up the chain, in this structure.

The property of being demand-driven is one of degree: Being “0 percent” demand-driven means all production/inventory decisions are based on forecasts, and so, all products available for sale to the end user is there by virtue of a forecast. This could be the case of fashion goods, where the designer may not know how buyers will react to a new design, or the beverage industry, where products are produced based on a given forecast. A “100 percent” demand-driven is one in which the order is received before production begins. The commercial aircraft industry match to this description. In most cases, no production occurs until the order is received

Many companies are trying to shift from a build-to-forecast to a build-to-order discipline. Chase production planning strategy that includes meeting the demand at any given point of time is used over the level strategy where production happens at constant speed with full capacity. Chase strategy is boosted with subcontracting, Just in Time (JIT), KANBAN, Advanced Demand Planning and S&OP (Sales and Operations Planning) to increase the response time and satisfy the demand variations.

Key characteristics of Demand Driven Supply Chain are:

• Product movements driven by actual demand/consumption

• Real-time demand/supply visibility across partner tiers

• Inventory managed to dynamic target operating levels

• Early identification of demand/supply continuity issues before they impact production

• Single demand signal shared across partner tiers – one version of the truth

Demand driven supply chains align their planning, procurement, and replenishment processes to actual consumption and consumer demand. Becoming demand driven allows a company to be more responsive to consumer needs while increasing profitability.

Supply chains are becoming more complex as companies expand their geographic footprint, increasingly leverage outsourced manufacturing, and expand their channel partner network. Supply chain executives are looking for ways to obtain real-time, transparent visibility across all tiers in the supply chain so as to better align supply with actual demand to help reduce supply disruptions and capital expenses.

In order to evaluate whether our supply chain network is demand Driven, we must ask following questions:

• Do you have visibility to your total demand and supply picture at any point in time? Does this visibility extend beyond your first-tier partners?
• Are all material movements driven by actual demand or by forecast?
• How quickly can you identify and respond to a potential supply continuity issue?
•  Does your entire supply chain function as one virtual organization with everyone working with the same information, processes, and metrics?
• Does it take longer than a day for demand changes to propagate to your second-tier  suppliers? 

      Hence Demand driven supply chain prepares the organization for the new era of fluctuating demands and uncertain supplies by leveraging the benefits of advanced forecasting, S&OP, Trade planning, JIT, KANBAN, Partner Collaborations and Lean enterprise.

Crafting the Digital Enterprise Internally

Next Generation Digital Enterprise leverage

• The unique methodology to engage and determine the audiences across multiple media platforms
• Active participation and knowledge sharing across various groups
• Interactive initiatives and drives across organization
• New insights that can be obtained from this valuable data
• Know how this new data can be used to demonstrate the value of your audiences and sell more effectively

Executives in all industries are using digital advances such as analytics, mobility, social media and smart embedded devices as well as improving their use of traditional technologies such as ERP to change customer relationships, internal processes and value propositions. It helps to —speed up the day-to-day processes of learning, planning and sharing knowledge delivering all the services online.

—Key Facts of Digital Transformation in Major Industries :

• Roughly 30 per cent of firms are engaging in extension or transformation with mobile, social media or analytics technologies.
• Factories including both mobile and analytics technologies to improve production significantly.
• Analytics is used by 72 per cent of respondents, mobile and social media by 62 per cent of organizations, and embedded devices by 24 per cent, despite their relative nascence within most

Key Facts of M&E (Media & Entertainment) Companies:

• Digital revenue already exceeds 50%  of their company revenue for digital leaders
• 55% of all respondents rate internal use of mobile technology “very” or “extremely” important.
• 57% of top-line revenue will be derived from digital channels by 2015
• 68% say smart mobility will “moderately” or “substantially” drive revenue growth in the next 2–3 years.
• CTOs (24%) and CEOs (23%) have the most responsibility for digital vision and strategy.
• 49% of digital leaders say they are using second-generation mobile technology to develop products and services.
• Only 19% have deployed second generation big data analytics solution in generating revenue
• 64% of digital leaders cite creating a culture of innovation as top strategic priority

Approach for Digital Transformation:

• Establish a Cross Functional Digital council
• Appoint the digital leadership
• Define landscape
• Legal guidance
• Understand company vision & social media strategy
• Benchmark and Measure

Envision of additional features and Recommendations:

• Dashboards for collaboration and resource sharing
• Easy-to-use interface for fast user adoption
• Open API for integrating 3rd party content or self-made tools
• Integration with Management Information Systems
• Innovative project pages, digital tests, online discussion forums, blogs and video recorders 
• News programs, online exercises, encyclopedia searches,  images, videos, white papers
• Automatic reports to save time and effort
• Leverage the internal lessons learned for building client solutions
• Mobile support for all internal applications

Digital Transformation in the Utilities Industry:

• Utilities have only adopted digital technologies in specific areas of the customer  experience
• Analytics is not widely used to enhance either the customer experience or internal operations 
• Untapped opportunities may exist in worker enablement and process digitization
• Data and integration issues may present challenges in other areas
• Utilities’ digital transformation management practices are relatively more mature than their use of digital technologies

Demand Planning

Demand planning is a process of managing all the demands of the products to enable the Master Scheduler / Planner to plan the supply. The two main components of the Demand are ‘Forecast’ and ‘Sales Order’.

Kinds of Demand:

Dependent Demand: It is the demand for the product caused by the demand of other products. E.g. demand for the raw material like steel and rubber increases in case the demand for automobiles is increased.

Independent Demand: If the demand of the product is not dependent on any product, then it is independent demand. Demand for the automobiles in the above example is the independent demand.

Following are the sources for demand:

·         Referrers & Consumers
·         Dealers & Distributors
·         Intercompany
·         Service needs

Demand planning covers the following activities:

·         Forecasting
·         Order entry / Promising,

·         Branch Warehouse Requirements,
·         Interplant / Inter-organizational requirement,
·         Service Parts requirements

Demand planning also helps in long-term and short term process selection, capacity planning and facility planning.

Key Demand Drivers:

Customers: Customers are king in today’s era. Customer preferences, general perception, word of mouth etc. play a key role in demand generation.

Competitors: New competitors, competitor’s differentiation in product and technology are major threats to the business.

Economic Policies: State and Central government policies has major impact on the customer spending and hence on the demand of the products.

Regulatory Policies: Legal guidelines set by the authorities can increase or decrease the demand.

Order winners or Qualifiers: Customer expectations are based on cost, quality, delivery and after sales service are the order qualifiers. If the product / service have special characteristics that attract the customers over competitors are the order winners.

Marketing strategy: Determining the marketing segment, developing market niches, analyzing competition and increasing the market share are some of the key marketing strategies that boost the demand.

Customer Relationship: In today’s cut throat competition, customers are continuously required to be informed about the new products, sales, schemes, annual maintenance discounts and so on to develop loyalty.

Characteristics of Demand:  Trend, Seasonality, Random variations, Cyclical

Demand Planning consist of collation of data, selection of appropriate techniques, forecasting and then taking corrective action if actual demand varies significantly.

Demand Planning objectives:

• Planning of long lead time resources like assembly line installations, capital equipments
• Planning of medium or short term resources like material, human resources etc.
• Shorten customer delivery time

Key forecasting principles:

• Forecast will never be accurate
• Forecast shall include estimate of error
• Forecast is more accurate for shorter periods
• Forecasts are more accurate for a family or group of products

Forecasting Methods:

·         Qualitative Techniques:

o   Grass roots

o   Market research

o   Panel consensus

o   Historical Analogy

o   Delphi Method

·         Quantitative Methods

o  Extrinsic technique: Certain set of external factors are taken into consideration like independent demand, GDP growth, agricultural production, steel production, oil prices, housing sector growth etc.

o    Intrinsic techniques: These use the historical recorded data for future estimates.

§  Average demand

§  Simple moving average

§  Weighted moving average

§  Exponential smoothening

§  Seasonal index

§  Regression Analysis

Planning Cycle

The base for the entire planning is the strategic business plan. Strategic business plan incorporates all the plan of marketing, finance and production. These are high level plans based on overall organizational perspective and devised by top management. they span across 2 to 10 years and talk about the strategic direction of the company.

Business Planning is based on the strategic plan and define the objective of various functions at an aggregate level. These are more financial oriented and address the sales, manufacturing, finance and other activities to achieve the strategic objectives. The horizon extend from 12 to 18 months.

Sales and Operations Planning include the planning of the manufacturing facilities required to support the business plan. It determines the overall level of manufacturing output broken down by quarterly / monthly time periods and ensures the integration between the production function and business plan. S&OP is responsible to determine the production rates, desired inventory levels and resource requirements for the end items / product families. Rough Cut capacity planning at this level helps in identifying and evaluating the bottleneck resources involved in the achieving production schedule.

Material requirement planning drills down further the requirement of the number of manufactured and purchased components. it is a plan for determining the production and purchase of the various components of the end items to support S&OP. Capacity requirement planning determines the detailed requirement of the labor and equipment resources needed to achieve the production of components as per MRP.