An Overview of Demand Management through Demand Supply Chain
Read this article researching the challenges in the fashion industry to respond to ever-changing consumer tastes. While reading, think about industries other than fashion where managing production capacity is an ongoing task.
Demand Management in the Supply Chain
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