A true demand-driven supply chain (DDSC) has always been the Holy Grail of operations managers around the world. Even when forecasts are finely tuned, an unexpected spike or drop in demand can wreak havoc on production schedules, leading to problems such as stockouts and lost sales; inventory pileups, markdowns, and write-offs; poor capacity utilization; and declining service levels. Today, these margin-sappers are increasingly avoidable thanks to recent advances in technology that finally can make the DDSC a reality.
The advantages are substantial. According to recent research by The Boston Consulting Group, some companies with advanced DDSCs carry 33 percent less inventory, improve their delivery performance by 20 percent, and reduce supply chain costs dramatically.
But few companies wholly understand the profound changes they must make to their organizations to reap the full benefits of a supply chain that is truly driven by demand.