Demand driven supply chain planning can lower costs, but transparency is key

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Dive Brief:

  • The application of demand driven planning within the supply chain (DDSC) has the potential to achieve a 15% reduction in inventory, a 20% or more increase in order fill rates, a 2% or more revenue increase and a 3-5% gross margin increase, Tecsys reports.
  • Active demand planning involves goal setting, strategy development, clearly outlined tasks, and established deadlines designed to meet those goals. Demand planning’s true goal is the creation of a demand-driven supply chain, formed from collaboration​.
  • Moving toward demand planning excellence within your own organization involves documenting your current processes, assessing your demand history, the application of an absolute metric, inventory classification, and advance planning for inventory introduction.

Dive Insight:

A demand driven supply chain, the next step in demand planning, isn’t for every business, but for the right ones can be highly effective.

If a company can achieve visibility in the form of absolute transparency while achieving an agile and quick-changing infrastructure, along with seamless coordination among staff, as well as optimizing not just for reduced costs but for truly improving production, it’s set to succeed as a demand driven supply chain. 

A further challenge is aligning metrics between suppliers, manufacturers, and retailers. Because the three often evaluate process differently, such as when manufacturers use fill rates as a best indicator, coordination may seem prohibitive. The bottom line for supply chain managers interested in applying demand driven methods is whether or not they can work together with all members of the chain to interpret signals the same way. 

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