Consumer Pull

With Demand--Driven Supply Networks, companies are moving from internally--focused supply chains to networks that react to consumer demand.


Are any other large CPG companies besides P&G looking seriously into supply chain networks?

"I'm sure the leaders are and are at various stages because the pay--off here is huge," says Drayer, the consultant. "This is a transformational business strategy. It really is starting with a focus on the customer and commitment to the customer across a corporation. I mean functional alignment to the common focus on the customer to reinvent business processes in order to sense and react to real time demand quicker."

Martin of AMR Research lists several companies that are "knocking on the door" of this network strategy: Kraft, Pfizer, General Mills, Unilever and others. He has presented to executive teams of major pharmaceutical and CPG companies who have responded favorably. In fact, he is now helping many companies build their DDSN strategy.

Getting started, however, takes a thorough commitment.

"First, companies will have to embrace ways to make their processes more flexible, not only in manufacturing, but also in their transportation operations so that they can rapidly adjust and effectively respond to their customer demands in an efficient manner," says McNelly of Manugistics. "Second, DDSN will require companies to get different data and have a more agile supply chain infrastructure that is capable of responding in near--time so that they can actually take real--time demand signals, such as POS data, and facilitate the rebalance of inventory and the rebalance of demand-'furthering the flexibility of a company's operations and its focus on what the customer wants."

Karin Bursa, vice president of marketing at Logility Inc., Atlanta, points out that DDSN means breaking down cultural and departmental barriers for "fluid decision-making," to enable companies to adapt and respond to changes in demand quickly and efficiently. Such a commitment starts with complete buy--in and commitment to drive change.

"DDSN must embrace all areas of an organization and get everyone marching to the same beat-'that of the customer," she says. "The largest obstacle is the cultural change required of employees to think beyond their departments, and this will require executive management to rethink incentives that support corporate supply chain metrics, not department ones. For example, what if sales were measured (in part) on forecast accuracy? A second obstacle has been technology. The DDSN vision has existed in some form for many years, but only with the advance of technology have we reached the point now that the vision can start to become a reality."

McNelly of Manugistics points out another obstacle to moving into supply chain networks: the quality and availability of POS data which is crucial to receiving fast demand signals.

"The POS data that companies are receiving is not always accurate or usable to begin with," he says. "Yet many continue to apply this information because it is the only thing they have, as retailers protect their own POS data and avoid sharing it."

"Open--sharing of POS information across the supply chain between consumer goods companies and retailers is vital to efficiently manage the supply chain to meet customer demands and to diminish the business and cultural friction between the two and ultimately create a supply chain ecosystem."

Faster, More Responsive Networks

When such a vision of DDSN becomes a reality, many benefits will be attained. They range from cost savings and speed to market to lower inventories and fewer stock--outs. Retailers and consumers will benefit as well.

"Recognizing that the success of all supply network partners is interdependent, P&G looks at this from the standpoint of how it will benefit consumers and retailers," says Arlequeeuw. "For consumers, a demand--driven supply network should put the right product on the shelf at the right time and value. In other words, it should allow us to successfully manage the increasing flow of innovative new products to the store. This benefits retailers as well, because new product innovations and new categories build their business."

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