Q&A with Eric Carter, Solutions Architect at Indigo
What are the key challenges and potential pitfalls with demand management?
Over the past 15 years, supply chains have become more elongated than ever before, with the decline of local manufacturing in many developed economies and its migration to lower cost economies in Asia and other developing countries. Today, supply chains are being stretched out and in extreme cases, can be 8-12 weeks in length, so getting demand and forecasts right is absolutely critical.
This also makes demand management more challenging and complicated, because it’s not possible to adjust manufacturing output easily in the short term to accommodate unexpected demand peaks and troughs. Companies that integrate their forecasting and demand management tools with existing supply chain and logistics systems can reap massive rewards as a result, and see huge increases in efficiency and customer satisfaction.
Forecasting is a key area where many companies fall down and I would estimate that 80% of companies get their forecasts wrong 80% of the time. And while most companies expend a lot of their effort creating a meaningful forecast, they tend not to measure its real world accuracy. To mitigate this, they really need to conduct something like a post mortem each time, to understand what worked when and, if things went wrong, the reasons why.
There are a myriad of world class forecasting and planning tools on the market but far too many business still rely on paper, people’s knowledge and use of a spreadsheet. For example, Indigo has experience of working with blue chip companies who still rely on spreadsheets for demand forecasting when they could be using specialist tools.
What’s the relationship between demand management and sales & operations planning?
Demand management and sales and operations planning are functions that are and should always be intrinsically linked to order fulfillment. Yet for many companies they are separate operations and often work in silos. For instance, they may be separate departments with a disparate relationship, when they should actually be a single unit under the remit of the supply chain manager.
How important is it to develop a collaborative approach?
It’s absolutely vital to have a collaborative approach between demand management and sales and operations planning, and never more so than right now, with almost zero tolerance to inflationary tendencies in the market and British manufacturers struggling with the impact of currency fluctuations and the pound’s drop in value.
But before a company invests in demand planning software, they need to be confident about their inventory accuracy and get the back end of the supply chain process right, with advanced warehouse and inventory management capabilities.
This is the foundation step upon which to build a strong supply chain model. It’s a fact that without a high level of confidence in the accuracy of stock information presented to professionals within the organisation, it’s all wasted efforts.
Is it feasible to synchronise production and demand and what does it take to achieve this?
It is feasible to synchronise production and demand for some of the largest and smallest of companies, but for anyone else in between, it’s extremely difficult. Larger companies tend to have fixed overheads, which makes it difficult to turn off local manufacturing capabilities. Equally, companies that outsource their manufacturing will face consequences if they suddenly turn off supply at the quantities agreed initially. Sadly there is no magic wand and success becomes a question of being more accurate with demand forecasting, rather than stopping manufacturing to meet reduced demand.
INDIGO SOFTWARE
Comments are closed.