How to boost supply chain performance by being truly demand driven
The perception that the global economy seems to operate at lightning speed is not news to discrete manufacturing. Executives are accustomed to reacting swiftly to each market upswing and downturn or risk falling behind. Products must be there when needed and only when needed. Too much stock means an increase in costs, too little means unhappy customers. For discrete manufacturing to succeed in this mercurial environment, a new way of managing supply chains is a vital. The old way — forecasting demand and then producing to fill that demand — simply won’t work today and in the future.
Using old Enterprise Resource Planning (ERP) tools to forecast future demand too often leads to a mismatch in stock levels, wasted capacity and, ultimately, high costs, unhappy customers and lost sales. Instead, to ensure a seamless supply chain from supplier to customer, companies are considering a new way: Demand-Driven Supply Chain Management (DDSCM) that uses actual demand to drive stock replenishment. Companies make to replace and ship to replace, keeping stock at a level that fits actual need, not error-prone forecasts.
Many companies say they use parts of a demand-driven model, but how accurate is that? CAMELOT wanted to know. To find out how DDSCM is being done and companies’ vision for it, we surveyed more than 150 executives and experts in a range of discrete manufacturing firms. We asked how they ran their supply chain, what impact it has on their competitiveness and their vision for the future of SCM in their companies. In our study “Time for a Paradigm Shift in Supply Chain Management”, we asked the following questions:
- How does a customer-centric market environment change supply chain management in discrete manufacturing companies?
- What key supply chain management (SCM) capabilities are needed to keep or even improve the competitive positioning in a global customer-oriented market environment?
- What should a competitive SCM approach look like?
The study provides insights for organizations on current trends and developments in SCM, the shift throughout manufacturing to Demand-Driven SCM, including benefits in delivery service and cost savings, along with plans to implement DDSCM in the future. The study concludes with guidelines for further action.