What do you stand to gain from making your supply chain truly demand-driven?
By “you,” I mean both you (individually) and you (your company). We will talk about the benefits to your company in a few minutes. But, if you (the individual) become the champion that leads the transformation in your company from wherever your company is today, into a future that looks like what we are going to describe below, just how valuable will you become to them?
The value to you (the individual) is in the value added to your reputation within your company and your company’s supply chain. It will, of course, add to your personal brand value wherever your career takes you in the future.
Becoming truly demand driven
Because “demand driven supply chains” is used to describe almost any combination of ingredients in supply chain planning and execution practices—depending upon who is employing the term, we want to be very clear.
In this article, we are using the term “becoming truly demand driven” to mean bringing your supply chain into alignment with the demand driven principles articulated by Demand Driven Institute.
In our usage here, “becoming demand driven” does not mean:
- Improving your forecasting
- Becoming make-to-order (MTO)
- Boosting supplies of inventory everywhere across your supply chain
- Simple “pull”—like Lean’s Kanban or similar
Benefits depend upon the starting point
It should be clear to all that the range of benefits derived from becoming truly demand-driven will vary depending upon how your company and supply chain function (or, fail to function) today.
If you are like most companies or supply chains we encounter, you are presently using traditional MRP (material requirements planning) or ERP (enterprise resource planning) methods. Of course, you have also found them to be deficient—or, even misleading. So, like the vast majority of companies, you are presently supplementing your ERP/MRP system with multiple spreadsheets, and (perhaps) some other homegrown applications.
If that is your company’s case, then you can expect the following benefits from becoming truly demand-driven:
- Improved competitive performance from reduced lead-times, increased on-time delivery, and improved order fill-rates.
- Increased system productivity when measured by Throughput / Operating Expenses ratios (Throughput will go up, while Operating Expenses will stay steady, or even decline)
- Inventories reduced while disruptive shortages also are reduced
- Stability improved in your plants and all along your supply chain (firefighting, and the need for firefighting will rapidly decline)
- Enhanced system-wide visibility
- More accurate decision-making
- Easier, more sustainable supply chain collaboration
The typical results from becoming truly demand driven look something like this:
- Customer order fill rates (customer service levels) increase from (often) lower than 70 percent to (not uncommonly) 98 or 99 percent
- Dramatically improved material and component availability for Lean manufacturing and TOC (Theory of Constraints) initiatives
- Markedly improved lead times, with days or weeks stripped out of current lead times
- Inventories are often greatlyreduced—virtually always, the reduction is significant
- System-wide productivity is improved and significant new capacities are often uncovered
- Expediting expenses for both inbound and outbound shipments are reduced
- System “nervousness” is cut as right-sized and strategically-positioned buffers absorb variability
- Supply chain agility rises without increases in operating expenses or major capital investments
- Reliance on forecasts declines, and the costly and relentless pursuit of ever more accuracy is ended
- Forecasting takes its proper role for use in setting long-term capacity requirement estimates and adjusting buffers in the near-term
Become a supply chain champion at your company—starting right now—by educating yourself and others.
We can help you get a running start. Leave your comments below, or contact us directly, if you prefer. We would be delighted to hear from you.