Consumer Pull

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

"DDSN benefits start with less time and cost tied up in the supply network," he continues, "and taking these out will enable a faster, more responsive and more flexible supply network. This can be measured as lower inventories and fewer out of stocks. At P&G, the percent of categories in which our products have higher than 5 percent out of stocks have decreased from 57 percent to 40 percent. Compared to five years ago, we have two to three times more SKUs, yet total costs are lower, inventories are in better control and volume is growing."

Bursa of Logility provides other benefits in the area of demand planning. Recent industry research, she reports, shows that a 5 percent improvement in demand forecast accuracy correlates to a 10 percent improvement in perfect orders (orders delivered complete, accurate, on time and in perfect condition) and a 10 percent improvement in perfect orders can yield 50 cents better earnings per share.

Drayer says, "If you're synchronized and working in harmony with your supply chain partners-'that means your suppliers on one end and your customers on the other-'and you're really beginning to operate as if it were one company'-that is, eliminating all the buffer inventory, eliminating all the friction that typically transpires between partners in a supply chain-'you can become more responsive by being quicker to market with new products. You can eliminate a lot of inefficiencies at all the interfaces, and you can start drawing on the intellectual capital of these different partners in the supply network. That's where the real power and savings are going to come from."

He is quick to point out the benefits of a supply network for retailers, as well as for manufacturers. He lists a higher in--stock, being first to market with new products, faster inventory turns and fewer handlings.

A supply network raises trading partner cooperation to another level, according to Drayer. He views it as the latest step over the years in a series of collaborative initiatives that include ECR, category management and joint business planning.


Selecting Software For DDSN

What is the best software for Demand--Driven Supply Networks?

Tips for selecting DDSN--enabled software range from looking for solutions that use a collaborative framework for easy communications to those that provide predictive analysis, according to executives from two leading providers.

"Companies should select solutions from providers with deep domain expertise," says Kevin McNelly, vice president of solution management at Manugistics Group Inc., Atlanta.

He says providers should be focused on:

*Delivering a successful solution that solves problems and issues and ultimately meets customer demands;

*Managing and linking global supply chain ecosystems;

*Measuring success across these complex supply chains;

*Providing predictive analysis and intelligent exception messaging based on the business metrics.

"A good forecast is the first step in a demand--driven supply network," says Karin Bursa, vice president of marketing at Logility Inc., Atlanta. "Select a solutions provider that specializes in delivering demand planning solutions specifically for consumer goods companies. Look for strong collaboration and the flexibility to supply scenario--based planning and 'what-if' analysis. Ask for several references."

Bursa also recommends the following:

*Look for solutions that use a collaborative framework for easy communications across internal departments, suppliers and cus'tom'ers. Integrate this into the sales and operations planning process.

*Demand-driven networks require real--time feedback. So evaluate solutions that include built--in performance management capabilities that will enable users to react to events and prevent late orders.

*With the right software, manufacturers and retailers will benefit, according to the software executives.

"Many CPG companies have done a great job of bringing down supply chain costs, but they still need to improve customer--level planning and the percentage of perfect orders; that is, orders delivered complete, accurate, on time and in perfect condition," says Bursa. "With the collaborative nature of a DDSN approach, CPG companies can anticipate reaping more improvements in customer service levels, operations and financial performance when planning for specific needs by key customer or channel."

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