Demand Management: Where Supply and Demand Chains Converge

The last several decades have seen an explosion in demand for enterprise software applications that can streamline supply chain processes and deliver Just In Time (JIT) manufacturing capability. Leveraging enterprise software for direct and indirect materials procurement, inventory planning, supply chain management, and product data management (among other functions), companies across a broad range of industries have been able to achieve significantly better operational efficiency in their supply chains.

Meanwhile, on the other side of their businesses, many companies have been moving aggressively toward outsourcing their product distribution. Especially in today’s tougher economic climate, companies use outsourced distribution channels to keep sales overhead in line without sacrificing revenues. And so, across such industries as semiconductor, software, networking equipment, telecommunications, consumer electronics, automotive, and industrial equipment manufacturing, distribution channels today account for up to 50% of revenues.

As a result of these trends, many manufacturers today find themselves in a unique quandary: They can generate more products, more efficiently than ever before, but they know woefully little about what to produce and for whom. They can now “see” into their supply chains better than they ever could, but they lack the same kind of visibility into their often-fragmented demand chain. Indeed, demand forecasts are typically generated from a direct sales force that is responsible for as little as one-quarter of overall revenue, then revised and fine-tuned by marketing teams who have little interaction with either direct or indirect sales professionals or with customers. The unfortunate result: inventory write-downs, missed financial projections, missed market opportunities, lost competitive advantage, and lost revenues.

New Answers to New Problems:Demand Management

To bridge the gap between their supply and demand chains, companies should consider implementing technologies that give them increased control over their “Demand Management” processes. Demand Management solutions can help drive the convergence of supply and demand chains by harnessing accurate and reliable information from a variety of direct and indirect channels, managing demand forecasting, inventory allocation, and entitlement processes efficiently, and then providing closed-loop integration between key demand and supply chain systems. By feeding accurate information from the demand chain into the supply chain while unifying communications and processes across both organizations, Demand Management systems can dramatically increase inventory turns, reduce inventory write-offs, increase revenues, and improve manufacturers’ competitive position in their markets.

Almost by definition, the successful Demand Management solution will be driven from the channel relationship management perspective. This is because the vast majority of revenues across all manufacturing industries today are generated from the channel, and that majority is projected to continue growing. As a result, up-to-date, accurate, and detailed demand information from the channel is critical to the success of any Demand Management solution. In addition, any successful Demand Management solution will need to incorporate a closed-loop process for gathering, analyzing, and filtering demand forecasts from channel partners; and as a result such a system will need to be tightly integrated to entitlement and other benefits program management systems for channel partners.

Using Demand Management solutions, companies can begin to bridge the gap between their supply and demand chains by:

• Reshaping their relationships with their channel partners to generate and ensure accurate demand forecasts. Manufacturers should implement a closed-loop process incorporating changes in entitlement levels based on ratings received for forecasting accuracy, thereby ensuring that just-in-time manufacturing is performed for the right products, in the right quantity, at the right time.;

• Altering their inventory allocations in real-time, based on real-time demand forecasts that incorporate information from all channels—both direct and indirect. This increases revenues by targeting allocations to those channels and regions that are the most effective sellers.;

• Providing greater supply chain visibility to demand chain partners, thereby eliminating the incentive to overstate forecasts and enhancing the channel’s ability to deliver reliably on its promises to end customers. This action will increase sales both through improved channel sales efficiencies and through improved substitution selling.;

• Providing greater channel visibility to the enterprise, removing the guesswork from the process of demand forecasting, inventory allocations, and entitlement management. By enabling sales, marketing, and operations management to “see” inventory in the demand chain better, such visibility will increase profitability by substantially reducing inventory write-downs and product obsolescence.;

Achieving Enterprise Systems ROI with Demand Management Solutions

Leveraging Demand Management solutions, manufacturers can increase their return on investment for existing supply chain and JIT manufacturing applications by feeding highly accurate data into their planning and forecasting systems, while they simultaneously leverage their channel partner relationships for greater strategic and revenue advantage.

As a KMWorld special offer, OnDemand will provide a half-day ROI workshop to share best practices and align your channel strategies with a Demand Management solution. This workshop, valued at $4,000, will be offered free if you are willing to commit your personal time and your key team members. Please contact OnDemand Inc. at 877-937-3239 or e-mail workshop@ondemandinc.com