While successful supply chain management involves coordination across many business areas, planning happens in departmental siloes, leading to short-sighted or inaccurate decisions. In addition, supply chain design tends to be reactive and cannot sense, flex, and adapt to disruptions, exposing the company to demand volatility. Conversely, modern solutions give demand and supply management teams a holistic and integrated view of operations, which allows them to make plans based on achieving the highest net value for the organization.
As demand data becomes increasingly complex, many supply chain management methods are no longer sufficient to sense and adapt to the increase in demand volatility. For example, order data, typically used to project demand, carry latency to affect the accuracy of forecasts.
As a result, sales generation activities in many companies have become disconnected from the operational activities required to fulfill the demand. This disconnection between sales and operation results in conflicting objectives, operational inefficiencies, and missed opportunities.
Why unify demand and supply management
As a response to the shortcomings of traditional supply chain management, more companies recognize the need for demand planning to help predict future demand patterns and respond swiftly to changing customer needs. As a result, there’s an increasing need to sense market demand and quickly translate the requirements into supply chain responses.
Companies need a holistic end-to-end process that considers organizational design, process design, and data governance to address trends, including specialization, globalization, and regional demands. For instance, teams in regional markets have a channel and process for sharing demand signals with the global team at corporate so that data is reflected in subsequent international programs.
Seven advantages of implementing integrated demand and supply management
A system that integrates demand and supply management means a radical departure from traditional supply chain management models. The shift from a traditional supply planning to a modern solution, such as Vanguard Predictive Planning™, requires companies to redesign their systems to include demand management strategies. These strategies incorporate sensing channel demand, using optimization to shape needs actively, and applying advanced analytics to drive intelligent responses.
While it may seem like a daunting task to retool your supply chain management, the benefits heavily outweigh the initial investment:
1. Increased adaptability to demand volatility
By incorporating demand signals, an integrated demand and supply management system allows companies to sense and respond to market demand in a hierarchical way around products, time, geographies, channels, and attributes. In turn, management of downstream data and integrated demand signal contributes to improving the efficiency of the supply chain by shortening demand latency to help organizations forecast more accurately while improving forecast quality.
2. Improved value creation
The cross-functional structure that facilitates integrated demand and supply planning also helps organizations focus on customer-centric metrics that create higher value for both companies and customers. For example, instead of a “make what we can sell” approach, organizations adopt a “how best to serve each customer” mindset by considering trade-offs and total costs relative to revenue potential.
3. Better external and internal collaboration
The integration of supply and demand planning means managers have to collaborate more closely with both internal departments and external partners or vendors. Relationships with supply chain partners are elevated above buy-sell transactions to include joint coordination and planning, as well as a willingness to share both information and risk. This need for seamless collaboration often results in the adoption of modern solutions, such as Vanguard’s Collaboration Hub™, to improve the operational efficiency of the entire organization.
4. More efficient and strategic resource allocation
When managers consider both the supply and demand side, they can understand the big picture and make better decisions on resource allocation to create the most value for customers, fulfill customer demands, and generate more sales. Seeing both sides also helps the company make informed trade-off decisions; for example, something that doesn’t seem to make sense from an immediate functional perspective may ultimately help position the brand for a new consumer segment and expand market share.
5. Team empowerment
An organizational structure that supports an integrated demand and supply management implies that executive decisions affect their units and the overall performance of the company. As a result, executives can make decisions with a broader impact that maximizes the overall value created for the company and its customers. To continue learning all these aspects of the company, new education and training systems need to encourage collaboration, which is essential for the organization’s continuous growth.
6. Focus on profitability
The integration of demand management into the supply chain turns the focus onto customers and meets their needs while maintaining profit margins. The focus on profitability often leads organizations to streamline their processes and develop flexibility and fluid scheduling to respond to market fluctuations.
7. Increased execution and operational efficiency
Comprehensive information on customer demand and profitability lets managers make proactive decisions, achieving short-term decisions that flex their operational capacity to maximize margins. As a result, organizations can capitalize on market opportunities through a customer-centric lens and mobilize quickly to respond to changes in customer demands. Managers can prioritize key customers that generate the most profit.
Implementing integrated demand and supply management
To integrate demand signals into your supply chain management, you need a solution that incorporates input and insights from different teams in your organization and presents them on a centralized dashboard to improve visibility, transparency, and the ability to respond to market fluctuations quickly and accurately.
Wolters Kluwer’s Vanguard solution is a model example. It allows demand and procurement teams to model and integrate data, forecast, collaborate, and report to maximize the impact of critical information and knowledge, which ultimately increases the profitability and operational efficiency of the entire organization.