BUS606: Operations and Supply Chain Management

SC is implored with different demands and requirements while got attracted as a standalone way of managing the operations. The requirements in SCM vary with time, for instance, researchers considered marketing as an integrated part of the SC in recent times. Seeing the increasing need to integrate key elements of SCM (e.g. demand fulfilment with a focus on efficiency) with marketing (i.e. demand creation with a focus on responsiveness), researchers have been advocating the concept of DCM. Demand creation and demand fulfilment are different activities in an organization although mutually dependent on each other. It is realized in the researches and the notion that DSCM is evolved as an extended footstep towards operational improvements through the integration of demand and supply side of organizations. Esper et al. define demand and supply integration as the balancing of demand and supply market information and business intelligence through integrated knowledge management processes to strategically manage demand-supply activities for the creation of superior customer value.

SCM has first appeared in 1982 which is defined as efforts to reduce inefficiencies and solve the problems throughout the SC, from raw materials to final customers. SCM shifts the mindset from single organization perspective to multi-actor co-operation. Heikkilä advocates that the SCM concept extends the view of operations from a single business unit or a company to the whole SC. On the other hand, DCM is relatively a new concept which integrates SCM with demand generation through marketing effort. Demand management in the supply chain is about the value creation throughout the SC which reflects customer's hope. Hilletofth et al. shows that DCM is about developing synergies between the demand creation and the demand fulfilment processes which comprise all the activities necessary for creating demand and is closely linked to the marketing discipline, whilst the demand fulfilment processes comprise all the activities necessary for fulfilling demand and is closely linked to SCM. De Treville et al. mention that demand integration includes increased access to demand information throughout the SC to permit rapid and efficient delivery, coordinated planning, and improved logistics communication. Madhani describes DCM that provides the alignment of demand creation and demand fulfilment processes across functional, organizational and inter-organizational boundaries that can leverage the strengths of marketing and SCM and meet the challenges of customer value creation in today's marketplace. Although it is suggested to integrate demand in SC, Rainbird suggested that rather than seeking to merge or harmonise what are two quite distinct concepts, it is better to see supply and demand chains as being inherently in conflict within the context of the organisation's overall value chain.

Albeit DC and SC distinct concepts, Hilletofth urges that the need to coordinate the demand and supply processes has been emphasized in both the DC as well as the SC literature. Both demand and supply chains deal with demand. DCM attempts to analyse and understand the overall demand for markets within the firm's current and potential product range. They also mention that SC, by contrast, emphasizes the efficiencies in the production and logistics processes, while the DC emphasizes effectiveness in the business. Esper et al. define demand side activities as relating to individuals and processes both inside and outside the focal organization that are responsible for generating and maintaining demand, and supply side activities relating to the individuals and processes both inside and outside the focal organization for managing operational areas that support and supply the products and services necessary for demand fulfilment. Hwarng and Xie investigated the various supply chain factors contributing to the complex dynamics and chaotic behaviours and found that among others demand pattern and demand information sharing was exigent. Christopher and Ryals state that the fundamental change, from supply chains to demand chains, is being driven by market forces and enabled by new technologies. The power locus is shifting steadily downstream, from producers and retailers to buyers and users. Hilletofth compares how companies are attaining competitive advantages by DCM or SCM and states that those embracing the demand-led business model (demand chain masters) focus on coordinating and managing the demand processes (DCM) by providing superior customer value while companies embracing the supply led business model (supply chain masters) focus on coordinating and managing the supply processes (SCM) to obtain a competitive advantage by providing comparable customer value at lower cost.

Demand-supply chain formation is the aggregation of demand and supply chain to interact at some point which is termed as order penetration point (OPP) and value-offering point (VOP) as entitled by Holmström et al.. As defined by them, OPP is the place in the SC where the supplier allocates the goods ordered by the customer and VOP as a meeting point of the DC and SC where the supplier fulfils demand in the customer's demand chain. They also argue that manipulating the DSC does more than improve customers' performance and benefit suppliers. The overall approach is to create a complementary situation where the demand is utilized without producing the waste and moving towards a sustainable way of SCM. According to Christopher and Ryals, the supply chain needs to be designed from the customer backward (demand pull) instead of from the factory outward (supply push), making it responsive to customer demands and reducing waste and returns. Hilletofth sees the goal of DSCM is to gain a competitive advantage by providing superior customer value at lower cost, and this is achieved by organizing the company around understanding how customer value is created cost efficiently (managing the DC), how customer value is delivered cost efficiently (managing the SC), and how these processes and management directions can be coordinated. He emphasizes on competences, a company established principles, DSC collaboration, and information technology support in order to achieve the benefits of DSCM which includes enhanced competitiveness, DC performance and SC performance. Figure 1 depicts the idea of DSC.

Figure 1: Demand-supply value chain