Supply chain demand driven

Forecasting in the flow would be simpler as well. One need only forecast and plan to a likely range for production. Supply chain partners then put in place the capability in terms of plant, equipment, and staffing to produce to that range. There is also a reduced need to forecast individual items, as supply chain production is determined by actual sales. We refer to this supply chain as a demand-driven supply chain, as discussed in the next subsection. 

Moving from long to short lead-times 

Replacing the batch with the flow model (as described above) 

Basing decisions on actual demand rather than forecasts 

FIGURE 28.6 Demand-driven supply chain — three phases. 

Replacing the economics of the batch model with those of the flow model 

In this section, we ll review some of the foundation concepts and practices that will help the demand-driven supply chain to become a reality. Organizations, including both product and service producers, will find value here for upgrading SCM practices. 

Approach Lead Time Flow Economics Build to Demand 

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Stage 4 The supply chain creates the adaptive enterprise. At this stage of development, the company develops mature processes for revenue management and makes trade-offs in chaimel strategies based on baseline lift factors. The focus is on sensing and shaping demand. This is often referred to as a demand-driven supply chain. 

Goal Build demand-driven supply chain capabilities. At this stage of S OP, the process is designed from the outside-in. It is focused on product sell-through in the channel, whereas the earlier steps... 

A detailed and robust description of the concepts and components that makeup a Demand Driven Supply Chain. 

A structured and integrated framework companies can use to assess their supply chain in light of Demand Driven Supply Chain concepts. 

To accomplish these objectives, a detailed review of academic literature was performed to identify the components and characteristics of a demand driven supply chain, as these characteristics are not currently available in one single source. 

The Economist Intelligence Unit (2009) The demand-driven supply chain a holistic approach. The Economist Intelligence Unit, London... 

Literature Review on Demand Driven Supply Chain (DDSC)... 

This chapter reviews the concepts of Demand Driven Supply Chain and the methodologies for assessing companies in light of DDSC cmicepts currently available in the academic literature, and finally, provides a summary of the operational and financial benefits of moving towards a DDSC. 

In Demand Driven Supply Chain companies, processes are built from the outside-in, which means, they are based on a clear view of the customer, what is important for them and the requirements for account profitability. These companies become zealots on new product introductions and use their supply networks to shape and respond to demand. 

Ayers and Malmberg (2002) describe a Demand-Driven Supply Chain as one in which the company is trying to shift from build to forecast to build to order discipline. The Demand-Driven Supply Chain is one that derives the information for production and inventory decisions from actual, real-time demand, and not forecasts - even if the forecasts use past sales history as a basis. They also argue that the property of being demand-driven is one of degree ... 

Ayers (2006) advocates that the Demand-Driven Supply Chain changes many of the conditions that cause wasteful variation in supply chain production. He states that, it is the foundation of the lean supply chain, and its implementation helps establish the operating range for low-cost production supply chain. 

He proposes a three-phase roadmap to implement the Demand-Driven Supply Chain concept. The phases are listed and also illustrated in Fig. 2.6 ... 

Evolution to a demand-driven supply chain will likely proceed in the order proposed above. Shortening the lead-time is fundamental to changing batch model economics. Basing decisions on demand comes after adopting the economics of the flow model. Along the path, there is feedback to earlier steps. For each phase in Fig. 2.6 above there are three to four methodologies to be applied towards a DDSC operation. 

In terms of methodologies to assess and identify company s performance, several articles show the importance of having a structured process in order to improve performance overtime. However, when it is specifically related to methods for assessing performance based on Demand Driven Supply Chain (DDSC) craicepts, the articles available do not meet the research criteria which is to have a clear and practical framework to support companies identify their current state based on DDSC craicepts. 

Verdouw et al. (2010) analyzed the European fruit market and identified that fruit supply does not sufficiently meet demand requirements. They proposed that the fruit supply chains needed to become demand driven, that is, being able to continuously match supply capabilities to changing demand requirements. In a demand driven supply chain, all actors involved are sensitive and responsive to demand information of the ultimate consumer and meet those varied and variable demands in a timely and cost-effective manner. As a consequence, information must be shared timely throughout the supply chain and the early alerted firms have to respond quickly to changes in demand or supply, which imposes stringent demands on the interoperability and flexibility of the enabling information systems. 

They presented a reference model for designing business processes in demand-driven fruit supply chains. The model consists of a reference modeling framework that defines process models at different levels of abstraction and includes a method of how they can be composed from a repository of building blocks. However, they did not provide any structured assessment approach to evaluate different business segments/industries in light of demand driven supply chain concepts. 

In this book, it is proposed to define the components of DDSC, then develop a structured methodology that will help companies assess their current state in light of demand driven supply chain concepts and identify their current strengths and gaps, and therefore, define a strategic plan to evolve and become more efficient and competitive. 

Despite of the limited information available on the benefits of becoming demand driven, two different studies provide a direction on the financial and operational benefits companies can capture when implementing a demand driven supply chain. 

As it cotdd be seen, there are great benefits on becoming DDSC, but the question that most companies face is how to rapidly evolve from current state in the direction of demand-driven supply chain. 

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