The Emergence of the Demand Network
A few months ago I wrote about “A 360 Degree Perspective On Customer Engagement” where I touched upon the 21st century consumer who is always on, always connected, and doesn’t make a move without consulting the internet. This blog continues this thought, and how the global markets have reached an inflection point that will differentiate businesses for decades to come.
These dramatic market shifts are happening on two dimensions: geographically and demographically. A report by E&Y has estimated that by 2030, three billion people are expected to enter the middle class, mostly in emerging markets. It is also estimated that 225 million people in Asia can already count themselves middle class (which is more than the total population of the European Union).This, of course, increases the demand for products as well as stretching the logistics networks that must satisfy this demand. At the same time, the “always on” millennial generation is emerging as a major demand driver, with access to huge amounts of information about products and trends on “what’s hot and what’s not”, via social media.
These factors have significantly increased market volatility, and the responsiveness required to respond to this volatility. If I can research and order a product in real time, the expectation is that the product can be delivered with the same sense of urgency. For the supply chain, it’s time to make some dramatic improvements — or risk being left behind completely.
In a recent article, “The Time to Move to a Demand Network Has Come,” Hans Thalbauer from SAP said:
“In light of this inflection point, companies will differentiate themselves through the responsiveness of their supply chain, introducing highly complex multi-channel ordering and fulfillment strategies across an already expansive logistics network. The leaders realize now is the time to imagine an entirely new supply chain that leverages the latest technology platforms to enable real-time decision making and visibility to drive predictive demand planning and response orchestration. In essence, the supply chains of the future will not be chains at all, but will transform into demand networks.”
So what exactly is a demand network?
The state-of-the-art demand network puts the customer at the center of all processes, and connects all business partners needed to fulfill the demand with the speed customers are expecting while meeting all efficiency and profitability goals. It requires companies to embed supply chain functions directly into the most powerful functions of the company such as merchandising, marketing, engineering, service, and logistics. For example:
- In industries such as retail, consumer products, and high-tech, supply chain functions and organizations need to become part of (or at least become tightly integrated with) the marketing and merchandising organizations.
- In certain discrete industries, creating a demand network means the differentiation with service and requires an integrated view with engineering.
- Logistics service providers and wholesalers need to leverage market data and customer insights to drive supply chain processes to create new products and services for their customers.
How to Execute the Demand Network?
Four key business processes will transform supply chains to demand networks:
- Integrated Business Planning: to balance demand plans with supply network constraints
- Demand Driven Supply Networks: to sense & shape demand and orchestrate the response
- Logistics & Order Fulfillment: to fulfill demand most efficiently
- Supply Chain Monitoring: to predict issues and ensure integrity of the demand network
Where each company starts is really a discussion of current drivers and challenges within the respective organization. Over the next few weeks I will be writing about these key areas in more detail and some of the key strategies and business capabilities required enabling these processes.
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