Demand Performance

The past several years have presented the electronics supply chain with a number of critical challenges — earthquakes, floods, and global economic instability. For many, these disruptive events have highlighted the fragility of the supply chain and how utterly dependent each member's success is on the collective supply chain's ability to achieve its ultimate mission — managing supply in order to meet demand.

Some analysts have theorized that in light of the seemingly growing list of supply chain risk factors, perhaps the supply chain has gotten “too lean.” In my opinion, it is a mistake to approach this issue strictly from a supply standpoint. Stuffing inventory pipelines is not going to accomplish anything. What we need to do better, as an industry, is to more effectively manage the demand portion of the equation.

Demand has always been viewed as a wild card and demand variability continues to be the top ranked source of supply chain complexity, according to the Gartner Group Supply Chain Top 25 for 2012 report. Though businesses have worked to fine-tune forecast models to more accurately predict demand, these forecasts are inherently flawed since they are based on historical trends.

Today, however, best-in-class companies are recognizing that demand can be managed in real-time and even shaped by tracking real-time SKU level consumption and building enough flexibility into the supply chain such that it can respond quickly and appropriately.

I recognize that sense and respond is by no means a new concept. It's an idea that has been bandied about since the 1990s and has been successfully deployed within the consumer goods sector for many years now. But, until recently, the intricacies and competitive forces within the global electronics supply chain have hindered widespread adoption. Now, new developments in information technology and protocol independent communications are removing the barriers to effectively gathering and sharing real-time supply and demand data.

Avnet's Control Tower service offering is a prime example of how a demand-driven supply chain can function. Control Tower provides a collaborative execution-based hub for all the supply and demand data Avnet collects from members of the customer's extended supply chain. Users receive push notifications alerting them to a change in conditions that might impact their supply chain, such as a point of sale (POS) report indicating that a product is moving more quickly than expected. To assure the OEM captures the additional sales potential, the various constituents within the supply chain must then respond by speeding up replenishment of their particular product or service.

With technologies like Control Tower providing the transparency necessary to seamlessly and simultaneously share information with supply chain partners, the big variable that remains is the response. Translating these demand insights into a coordinated supply chain response is definitely a challenge. It is important for OEMs to establish a baseline expectation from the very beginning of an engagement to ensure all partners are clear about what they need to do and then provide them the information they need to ensure their response is timely and meets the OEM requirements.

The Gartner Top 25 for 2012 clearly demonstrates that the most profitable and innovative companies are those that are successfully transforming their supply chains into “demand-driven value networks.”

This promises to be a new and exciting path for our industry.

3 comments on “Demand Performance

  1. SP
    October 4, 2012

    Yes indeed, demand is the key factor in supply chain business. One needs to keep up with the rising demands and at the same time execute proper risk planning for draught situations. I guess this is the key objective of sales departments in a company.

  2. stochastic excursion
    October 5, 2012

    Improved sensitivity to demand is an important step forward for making the supply chain more efficient.  I can't help but wonder, though, about the risk that this advancement may make supply chains too “reactive”–that is, tracking swings in demand too closely and feeding back into them.  Of course, with humans in the loop making decisions, the likelihood of serious oscillations is pretty small, but for a systems engineer, fun to think about.

    October 8, 2012

    It is not too daft an idea that the system could oscillate.  Give it too much gain, to orapid feedback and too little damping and then we could see oversupply followed by nothing on the shelves.  Afterall it is just a system like everything else is in life and so it should be governed by basic control system theory,

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