Jun 11, 2009 | Demand chains, Management, Sales, Strategy
Most supply chains are driven by orders, someone reacts when an order is received.
The niggling question is always about demand, as most recognise it drives orders, inventories, innovation, competitive pressure, and so on, but is rarely measured.
Orders are at the end of the process, they arrive after making allowances for out of stocks, poor display, customers memory, competitive activity, the skill and interest of the sales person, and many other factors.
Demand is created by understanding the customer, and positioning your good or services in their minds as the best value solution available to address their need. This is longer term stuff, harder to measure, easy to ignore, but it is the foundation of commercial sustainability.
How much better would it be to have in place signals that reflect demand, they might give us an opportunity to reduce the incidence of lost opportunities, whilst better managing our investment in inventories, brands, customers, and the short term sales tactics used to stimulate an order.
Jun 1, 2009 | Demand chains, Management, Sales
The churn of employees in large companies often creates difficulties in retaining a continuity of relationship with customers. This particularly happens in situations where a buyer has substantial market power, such as a large retailer.
How do you build a relationship in these circumstances where the buyers get rotated on a regular basis, and there is usually a very active competitive environment for the attention of the buyer currently in the chair ?
- Account management personnel need to ensure there is a focus on the value you bring to the customer, not just on the price of the deal on the table being negotiated, or the person currently filling the buying role.
- Do not allow the costs of doing business with a customer to overwhelm the investment needed in your consumers and the brand benefits you deliver to them. Retailers are not good marketers for you, they are interested in their brand, not yours.
- Maintain as many personal relationships and points of contact as possible by engaging as many people in your business as possible with their peers in the customers business. Particularly valuable are relationships around service provision and logistics, removed from the negotiating battlefield.
- Be proactive in all things, rather than reactive.
- Be prepared to say “no”, and be able to do so without damaging the ongoing relationship, rarely easy to do, just easy to say, but it must be done to maintain a sustainable negotiating position that leaves you with appropriate margin. Many businesses have gone broke being “successful” with customers with whom they have little leverage.
May 27, 2009 | Demand chains, Operations
About the only thing we know about forecasts is that they are virtually always wrong, often drastically. This being the case, the ability to quickly react to short term changes in supply and demand, an advanced degree of agility would be a pretty useful weapon in the survival kit.
Consider the agility in your business, and do not get it mixed up with flexibility, which is the ability to adapt your business to accommodate the longer term structural changes in the competitive environment.
Many of the “lean” tools are designed to assist the agility of a business, as they enable agile response to changes in short term demand.
May 17, 2009 | Demand chains
Coordination and Control are the key words in managing demand chains, and an orchestra is a great metaphor for a demand chain.
To work effectively a chain needs control in the sense of a conductor in an orchestra, who dictates the interpretation of a piece of music, and then co-ordinates the detailed contribution of the players.
The individual players need the detailed performance information about the mechanics of their contribution contained in the music, and a clear and unambiguous understanding of their role in the production of the complete sound of the orchestra from the conductor, including a clear understanding of the consequences on the whole, of a failure to perform to the agreed standard by them.
Without both types of information, the detail of the individual actions, and the understanding of how those actions fit into and enhances the whole, there is no possibility of an optimum outcome.
May 10, 2009 | Demand chains
Over many years of being involved in the evolution of demand chains, there appears to be a number of stages through which they evolve. It is almost always iterative, often with many false starts and dead ends, but those that persist, display the following stages:
- Catalyst. At some point, someone yells, “There must be a better way!”. Generally this happens in tough times, about now would be appropriate.
- Pre-chain. This occurs as a few look around at the data, and wider commercial environment trying to identify a better way for them. Most do not go beyond this investigation, as it now starts to get hard.
- Cautious first steps. Generally a relatively simple collaboration centered around something they all use or need, such as carton, transport or service supply, that is essentially non competitive.
- Commitment to a chain as a competitive differentiator. Key here is to collaborate using information that in less enlightened times would have been seen as proprietary.
- Evolution to a demand chain. This takes time, commitment and is a journey with no end, just an evolving chain that continually improves its ability to react to short term changes in consumer demand, as well as being sufficiently adaptable to evolve its business model to accommodate evolution in the commercial environment. Examples of true demand chains are few and far between. Dell computers lauded “build to order” business model is the best known example of a large business that acts as a manager of a demand chain. It is one of the many models around, largely housed in small businesses where the strains of dumping the status quo are more easily managed.
May 6, 2009 | Demand chains
The uneven distribution of power in a supply chain is the norm. To move beyond simple supply to a value chain, or further to a demand chain, the decision making power needs to be distributed more evenly through the chain via collaborative mechanisms.
The ultimate collaborative mechanism is transparency of information, which puts decision making at the point where it adds most value to the operator at that point in the chain, as well as maximising the value to the whole chain, particularly to the end consumer. It removes the pricing power that accumulates with information at points of arbitrage in a chain.
