The inclusion of the demand channel into the SCM concept has been termed the demand-driven supply network (DDSN). Introduced in 2003 by AMR Research, a DDSN can be defined as “a system of technologies and business processes that sense and respond to real-time demand across a network of customers, suppli-ers, and employees” [18]. DDSN organizations are more demand sensing, capable of more demand shaping, and able to execute a more profitable demand response than companies that are simply supply-centered. A DDSN possesses the follow-ing attributes:
Business Philosophy.
◾ In the past, supply chains were configured to maxi-mize large stocks of inventory to be sold to customers based on forecasted
estimates of demand. These supply chains were fairly rigid and monolithic, dependent on linear channel optimization techniques. They were also driven by productivity-centered factory schedules or “push” system allocations, and prone to the bullwhip effect as demand uncertainty cascaded through the supply chain. Today, an expanding global marketplace is requiring organizations to create supply chains that are more flexible, responsive, and synchronized to actual customer demand. A DDSN strategy centers on the configuration of supply chain processes, infrastructure, and information flows that are driven by the demand channel rather than by the constraints of factories and distribution intermediaries located upstream in the supply network.
Technology.
◾ A DDSN requires technologies that enable businesses to closely synchronize demand and supply. DDSN technologies provide real-time demand sensing and visibility to changing marketplace requirements. An effective DDSN should also possess technologies that enable the organiza-tion to quickly determine profitable tradeoffs and compromises in response to unplanned events occurring in the demand channel. Finally, technologies should enable planners global access to actionable data, information toolsets permitting rapid and collective decision-making based on “what-if” tives, and comprehensive scoring mechanisms that provide for clear alterna-tives when choosing between competing courses of action.
Process value chain
Value delivery network
Demand signal Demand signal
Lean, adaptive value chain
Demand channel
Customer focused Demand
signal
Channel-driven fulfillment Demand-driven
replenishment
Demand focused products
Figure 4.7 Components of a DDSN.
The control of inventory through the supply chain has always been exposed at the very last stage – delivery to the retailer. What happens when retailers cut inventory to the bone? They don't have what you want about 8% of the time you step into their store; out of stocks are about double that rate for promotional tems. Most relailers handle that situation in one of three ways: they send someone to scrounge around the stock room just in case;
they take your name and promise to call to see if other stores have what you're looking for, or they throw up their hands and shrug.
warehouse deliver thc product directly to the customer's home or place of business or to a nearby store for pickup, or by having a similar store send the product to the customer's home.
Visibility to the last mile
“The critical backbone to the solution is the combination of our order manage-ment, global inventory visibility and store management operations,” says Jim Bengier from Sterling. “We've bundled them together to provide a complete solution.”
But in addition to addressing the out-of-stock issue that retailers wrestle with, it completes that last mile, connecting what's going on inside retail stores forward to the customer's home and backwards to the distribution center.
“This is the starting point,” Bengier says. “But, if a retailer wants to do this, we could extend visibility all the way back to the manufacturer.”
To solve this problem sterling com-merce introduced a new application that replaces the shoulder shrug with a layer of intelligence, visibility, and automation to save the sale. Once sales clerks open the application they gets global visibility into the inventory network as defined by the retailer. That could be visibility into neigh-boring stores, all the stores in a district or region, or inventory in the ware-houses.
At this point retailer decides how to complete the sale, either by having a
Demand.
◾ The fundamental characteristics of a DDSN resides in its ability to rapidly recognize all forms of demand arising from the marketplace. Demand can come from channel forecasts, booked orders, or emerging opportunities.
By using monitoring tools like customer analytics and demand-event notifi-cation, supply chains can not only understand demand, but even be able to shape it. Knowing what drives the customer purchase and requirements for product features, price points, and buying habits keeps supply chains focused on real-time demand. In the end, being demand-sensitive is more than just filling orders: it is using demand signals to scale processes and resources quickly across the entire supply network.
Collaborative Network.
◾ While a DDSN more closely integrates market-ing, customer management, and operations inside the organization as to what products and capacities are needed to match the demand-pull, it also acts as a supply chain unifying force. DDSN engage suppliers, delivery
capabilities, and customers in collaborative value-creating relationships.
DDSNs require network supply nodes possessed of the ability to rapidly reconfigure internal processes and external channel points of delivery by tapping into the competencies found in outsourced manufacturers, supply partners engaged in sourcing and collaborative product design, and third party logistics providers. The goal of executing “demand-pull systems”
is realized by channel supply points capable of rapidly aligning demand with the network’s portfolio of resources to service the unique needs and priorities of the customer.
To summarize, AMR Research characterizes a DDSN as “a supply chain driven by the voice of the customer,” constructed to serve “the downstream source of demand rather than the upstream supply constraints of factories and distribution systems.”
A DDSN enables supply and delivery channel nodes to understand and adapt to demand anywhere in the supply chain as it is actually occurring.