More responsive and intelligent sourcing and procurement processes are a clear ways for companies to work toward their budgetary goals. Creating a model based on demand at other levels of the supply chain is a clear objective for organizations of all types, but reaching this signpost may prove difficult.
The fast-moving and accurate data required to go from forecasting to reacting to demand is a recent addition to the sourcing space, enabled by fast technological development. Companies’ levels of readiness to deal with these systems will necessarily differ from one supply chain to the next. These divergent starting points will determine each business’s path to demand-driven sourcing.
Predicting the future
Changing with blatant and subtle market forces is the central mechanic of demand-driven supply chain management. In an article he contributed to Supply & Demand Chain Executive, LLamasoft’s Jeff Metersky explained that businesses should change the way they think about trends and demand to ensure they’re paying attention to all relevant factors.
It’s relatively easy to predict how a holiday-season demand spike or the introduction of a new product line will impact sourcing needs and adjust contracts accordingly. Less simple are adjustments based on long-arc shifts in consumer interests and preferences. Metersky explained that demand-driven strategies will have to incorporate the latter factor if they are to succeed.
He also noted that the road to such an advanced supply chain model will fare better if leaders sketch their planned path in advance. Some companies struggle more with reacting to long-term demand now, whereas others should focus harder on changing their operations based on projected impacts of their decisions and strategies. Setting up a design that will move organizations closer to their long-term goals is key in any kind of sourcing change. This step requires first becoming knowledgeable about current capabilities and blind spots.
Pointing to success
As IndustryWeek pointed out, IDC’s recent research on the supply chain of 2020 contained an exciting prediction: By that date, one-fourth of manufacturing firms in select industries will have become truly demand-driven, producing goods at an ideal level according to market forces. The source added that this means organizations will still have access to the optimized processes that dictated speed and effectiveness in the past, but they’ll be able to anticipate market movement well in advance and adjust accordingly.
While the predication is for 2020, IndustryWeek suggested that the necessary tech tools are making their way into companies’ hands now. Artificial intelligence as a decision-making aid is a potential cornerstone of future supply chains, taking planning beyond the capabilities of the human brain. Furthermore, assets such as 3-D printers and machines that can retool themselves on the fly will make factory spaces more flexible, ensuring infrastructure doesn’t go to waste.
Supply chain practices that scale up or down on demand, from purchasing to manufacturing and logistics, are a helpful goal to aim for. Every step companies take toward these idealized operational models will likely lead those businesses to new and valuable business practices, saving money and boosting effectiveness.