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Demand-Driven Supply Network: Are you Meeting the Demands?

Posted by Phil Van Wormer on Apr 14, 2015 12:00:00 AM

Have you noticed that our world operatesth by an "on-demand" call and response? The process can often appear like this: the consumer needs, and the manufacturer supplies, and the quicker the better. The reasons for this are many, and are partially driven by technology. People are also demanding more, as they get accustomed to quick response time in all areas of life from same day deliveries to online banking to flight tracking. There are very few things for which people must wait years, months, or even weeks.

This trend of on-demand expectations is only going to grow. According to a survey, Big Demands and High Expectation, The Deloitte Millennial Survey published in 2014, in about a decade 75% of the workforce will be made up of Millennials -- the notoriously tech savvy and demanding generation. Demands are not always bad, and can often bring about innovation and necessary change. But can the supply chain handle these demands, both in terms of its employees and its customers? 

According to the Boston firm AMR Research, this new world in the supply chain is called The Demand-Driven Supply Network (DDSN) and is "a system of coordinated technologies and processes that senses and reacts to real-time demand signals across a supply network of customers, suppliers, and employees to improve operational efficiency, streamline new product development and launch, and maximize margin." Increasingly, companies require a pull model, in which they respond to consumer demand rather than an antiquated push system in which they forecast sales.

Years ago many companies, including IBM, recognized the new models necessary to cut costs, improve efficiency, and increase customer and partner satisfaction. With an “on-demand” system, including a pull model, IBM cut costs over a three-year period by $7 billion. According to George Prest, CEO of MHI, whose company recently released an industry report on supply chain innovation, “The speed at which supply chain innovation is being adopted coupled with rising consumer expectations for anytime, anywhere service is stressing traditional supply chains to near-breaking points. Companies that continue to rely on traditional supply chain models will struggle to remain competitive and deliver orders that are complete, accurate and on-time.”

Years of innovation and system upgrades have produced impressive results for companies, however the pressure to continue to reduce costs and meet high consumer demands is very much still present. According to an MHI and Deloitte survey, “customer pricing pressure (51 percent), demands for faster response times (50 percent), and rising customer service expectations (49 percent) are the top three issues that supply chain leaders and professionals find very or extremely challenging.” Innovation seems to be both a blessing and a curse in the supply chain, creating an expectation for more, better, faster products and service. Innovation may be the cure, but perhaps attitudes and expectations need to change as well. If not, will only the strongest survive? Is your company ready for what is to come? It will be fascinating to see what the Millennial generation brings to the workforce and marketplace, and whether they will have the solutions to respond to the demands.

Topics: supply chain management