Time was, a supply chain was as simple as a farmer partnering with a stallholder to sell produce in the nearest market. These days, supply chains are complex; enabled by technology to be capable of spanning many countries and even continents. Supply chain management has become a discipline in its own right now that we’ve reached high levels of complexity and sophistication in our resourcing.
Supply chains have elongated and fragmented, focusing always on lowest cost and least risk. But in recent years customers have changed. Today’s customer values speed and flexibility and takes low cost and low risk for granted.
Shorter product lifecycles make life harder for production managers who are tasked to respond at short notice to changes in demand. Traditional manufacturing theories are cracking under the strain of modern consumer expectations.
It’s also harder to predict demand. Trends change quickly, fashions are seasonal and technology moves quickly to render prior product offerings redundant in the blink of an eye.
It’s particularly hard to forecast sales trends when demand needs to be predicted across the length of a global supply chain. This leads to inefficiencies right across the chain and that raises costs for all players.
One solution could be to avoid trying to second-guess demand and embrace the chaos of a fast-changing world.
Instead of trying to forecast sales and meet expected demand in advance, some manufacturers are abandoning planning methodologies to produce goods only on demand. This short-notice approach to production reduces wastefulness and thrives in uncertainty.
In a demand-driven approach, manufacturers tailor their production to actual orders rather than try to forecast sales. It’s a technology-enabled method of rapid production that can introduce massive efficiencies into the production process by delivering enormous speed and flexibility.
Until recently, demand-driven manufacturing has only been attempted by manufacturers who are confident in their control over the supply chain. But in a more complex world, demand-driven manufacturing may become the norm.
There’s evidence that a demand-driven approach is the best way to optimise the customer experience by giving customers what they want when they ask for it, rather than trying to second-guess their needs ahead of time.
It’s all about customer experience
Research by KPMG in this area strongly connects the demand-driven approach with improved customer satisfaction. KMPG’s argument is that customer experience is critical to success, and brands that manage to provide a strong customer experience tend to have higher revenue growth.
Demand-driven manufacturing is one way to ensure customers have what they want, which is usually speed, a greater choice of product and greater flexibility in the way goods are delivered to them.
KMPG also found that many business leaders felt they lacked the necessary speed and agility to compete effectively.
Businesses were also concerned that their supply chain wasn’t up to the task ahead of them. And it’s no wonder. The way that supply chains are generally set up no longer suits the needs of customers.
Instead, it’s vital to make supply chains more customer-facing, and measure performance in terms of meeting customer needs rather than on serving the business’s bottom line.
Visibility is the key to all this. At every stage in the chain, all participants need to understand what customers want and the status of fulfilling that. Forecasting is no longer based on predictions but on real-time information supplied directly by customers. Demand-led manufacturing can help with this shift in focus.
Technology is key
One of the essential elements of this demand-driven approach is having demand flow technology in place. This type of technology makes customer demand the primary signal that guides production activity.
Coca-Cola uses this type of technology in mobile form to instruct delivery drivers in its supply chain which specific depot to take their consignment to – even whilst they are already en route.
This ‘last minute’ approach helps ensure the supplies go where they are most needed and eliminates the problem of misallocation of materials.
Some new types of manufacturing are well set up for demand-driven manufacturing. 3D printing of items such as hearing aids can cut out much of the supply chain that was previously required to manufacture such devices.
3D printing offers opportunities for fast fulfilment of customer orders with only a short supply chain.
Technologies such as self-driving vehicles, drones, and warehouse automation all contribute to a more flexible supply chain with rapid ability to change, scale, and respond to customer orders quickly.
One of the greatest challenges for manufacturers is adapting to the new manufacturing reality.
It’s taken many years and much effort to achieve the supply chain status quo; demand-driven manufacturing could rewrite everything that they’ve been working towards.
Moving over to a demand-driven manufacturing approach is a sizeable challenge for any enterprise, one that requires lots of training and the development of new systems and processes. It’s not going to be easy to adapt to new ways of doing things.