Demand chain management
Encyclopedia
Demand chain management is the management of upstream and downstream relationships between suppliers
and customer
s to deliver the best value to the customer at the least cost
to the demand chain
as a whole. The term demand chain management is used to denote the concept commonly referred to as supply chain management
, however with special regard to the customer
pull. In that sense, demand chain management software tools bridge the gap between the customer relationship management
and the supply chain management. The organization’s supply chain processes are managed to deliver best value according to the demand of the customers. A study of the university in Wageningen
(the Netherlands) sees DCM as an extension of supply chain management, due to its incorporation of the market orientation perspective on its concept. While the term "demand-driven supply chain or network" denotes a set of concepts, the term "demand-driven execution" or DDE is used to express the means of achieving those concepts.
DDSN uses a capability model that consist of four levels. The first level is Reacting, the second level is Anticipating, the third level is Collaborating and the last level is Orchestrating. The first two levels focus on the internal supply chain while the last two levels concentrate on external relations throughout the Extended Enterprise
.
An important component of DDSN is DDM (“real-time” demand driven manufacturing). DDM gives customers the opportunity to say what they want, where and when.
Corsten and Gruen describe key factors for lowering OOS-rates:
Implementation of system supported processes leads to the new technology Extreme Transaction Processing
described by Gartner Research. This technology allows to process the huge amount of data (POS, RFID) in real time providing information for store managers, shelve managers and the supply chain.
Supply chain
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to...
and customer
Customer
A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...
s to deliver the best value to the customer at the least cost
Cost
In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this...
to the demand chain
Demand chain
-Concept:Analysing the firm's activities as a linked chain is a tried and tested way of revealing value creation opportunities. The business economist Michael Porter of Harvard Business School pioneered this value chain approach: "the value chain disaggregates the firm into its strategically...
as a whole. The term demand chain management is used to denote the concept commonly referred to as supply chain management
Supply chain management
Supply chain management is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers...
, however with special regard to the customer
Customer
A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...
pull. In that sense, demand chain management software tools bridge the gap between the customer relationship management
Customer relationship management
Customer relationship management is a widely implemented strategy for managing a company’s interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes—principally sales activities, but also those for marketing,...
and the supply chain management. The organization’s supply chain processes are managed to deliver best value according to the demand of the customers. A study of the university in Wageningen
Wageningen
' is a municipality and a historical town in the central Netherlands, in the province of Gelderland. It is famous for Wageningen University, which specializes in life sciences. The city has 37,414 inhabitants , of which many thousands are students...
(the Netherlands) sees DCM as an extension of supply chain management, due to its incorporation of the market orientation perspective on its concept. While the term "demand-driven supply chain or network" denotes a set of concepts, the term "demand-driven execution" or DDE is used to express the means of achieving those concepts.
Demand-driven supply network
A Demand-driven supply network (DDSN) is one method of supply chain management which involves building supply chains in response to demand signals. The main force of DDSN is that it is driven by customers demand. In comparison with the traditional supply chain, DDSN uses the pull technique. It gives DDSN market opportunities to share more information and to collaborate with others in the supply chain.DDSN uses a capability model that consist of four levels. The first level is Reacting, the second level is Anticipating, the third level is Collaborating and the last level is Orchestrating. The first two levels focus on the internal supply chain while the last two levels concentrate on external relations throughout the Extended Enterprise
Extended Enterprise
An extended enterprise is a loosely coupled, self-organizing network of firms that combine their economic output to provide products and services offerings to the market...
.
Competitive advantages
To create sustainable competitive advantages with DDSN, companies have to do deal with three conditions: Alignment (create shared incentives), Agility (respond quickly to short-term change) and Adaptability (adjust design of the supply chain).Misconceptions
There are five commonly made misconceptions of demand driven (DDSN):.- Companies might think they are demand driven because they have a good forecast of their company.
- They have implemented lean manufacturing.
- They have great data on all their customers.
- They think it is a technology project and the corporate forecast is a demand visibility signal.
- They have a better view of customers demand.
An important component of DDSN is DDM (“real-time” demand driven manufacturing). DDM gives customers the opportunity to say what they want, where and when.
Demand-driven Execution
Demand chain management is the same as supply chain management, but with emphasis on consumer pull vs. supplier push. The demand chain begins with customers, then funnels through any resellers, distributors, and other business partners who help sell the company’s products and services. The demand chain includes both direct and indirect sales forces. Customers demand is hard to detect because out of stock situations (OOS) falsify data collected from POS-Terminals. According to studies of Corsten/Gruen (2002, 2008) the OOS-rate is about 8%. For products under sales promotion OOS rates up to 30% exist. Reliable information about demand is necessary for DCM therefore lowering OOS is a main factor for successful DCM.Corsten and Gruen describe key factors for lowering OOS-rates:
- data accuracy
- forecast and order accuracy
- order quantity
- replenishment
- Capacity (time supply)
- Capacity (Packout) and Planogram Compliance
- Shelf Replenishment
Implementation of system supported processes leads to the new technology Extreme Transaction Processing
Extreme Transaction Processing
Extreme transaction processing is an exceptionally demanding form of transaction processing. Transactions of 10,000 concurrent accesses or more would require this form of processing.-Description:...
described by Gartner Research. This technology allows to process the huge amount of data (POS, RFID) in real time providing information for store managers, shelve managers and the supply chain.