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Have you thought about this question; do you appreciate the difference between Supply Chain and Demand Chain? Is it relevant to you and your role in your organisation?
This short blog will try to answer these questions giving you the knowledge to consider whether you should make any necessary changes to how you work, both internally and externally.
Let us try to explain the two terms, Supply Chain and Demand Chain.
Imagine for example that you are producing watches; these go into a warehouse after production and are despatched to a wholesaler, then to a retailer. At each stage there may be add-ones such as packaging, advertising, etc. So there is a push of products and services with an expectation that the customer wants them, but they may not. This process is called forecast driven which implies that there is stock sitting in the supply chain waiting for a customer demand
Demand Chain on the other hand relates to the customer demanding products or services as and when they are required which is referred to as a pull. This process is called demand driven where customers demand products and services promptly. A Demand Chain will require a long lead time where the demand goes back to the producer with the delay of production and further delays in delivery.
The supply process implies high stocks, which does go some way to meeting the requirements of the customer though has associated high costs. The demand process on the other hand does not meet customer service expectations of availability though does have lower costs.
What is needed is a compromise or a closer relationship between the producer and the customer. There are a number of ways to achieve a satisfactory outcome and profitability, this short blog does not have the space to explain them all. Key ones are as follows:
- A greater relationship and understanding between the producer and the customer
- Agile organisation – becoming more responsive to customer demand
- Postponement – delay the commitment of a product to its final form or location for as long as possible
- Information – improve information across the complete chain, making it visible for all parties
These suggestions will not be easy to incorporate as they are not a quick fix. Organisations have to start somewhere; these four areas would give significant, positive results. Global world-class training providers Glomacs [based in the UAE] provide public and in-house training courses for supply chain personnel at every level. Now is the time to develop your people performance by anticipating the improvement in the economic situation within the global marketplace.
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David Walters [Professor, at the Sydney Graduate School of Management, Sydney, Australia]
Mark Rainbird [Research Fellow, at the Sydney Graduate School of Management, Sydney, Australia]
The term “value chain” encompasses a variety of ideas and concepts. This paper identifies two major themes: a “macro” perspective of how markets operate and, at the other extreme, a process‐driven “micro” view of the individual firm itself. Focusing on the latter in particular, it seems that corporate emphasis is increasingly efficiency based with the prime objective the reduction of costs. The recent
difficulties experienced by McDonald's, Sainsbury and Marks & Spencer may be due in part to a single‐minded focus on supply‐chain management. Instead it is argued that a firm is best placed to create value and exploit market opportunities when there is an effective combination of supply‐chain capabilities and demand‐chain effectiveness to maximise the organisation's overall value chain. These issues are explored using practical examples from the retail and fast food industries. Questions
whether traditional views of marketing are broad enough or whether, just as the logistics manager reinvented himself as the supply‐chain manager and the new corporate hero, the marketing professional needs to reinvent himself as the demand‐chain manager. Walters, D. and Rainbird, M. [2004], "The demand chain as an integral component of the value chain",
Journal of Consumer Marketing, Vol. 21 No. 7, pp. 465-475. //doi.org/10.1108/07363760410568680 Emerald Group Publishing LimitedAbstract
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Copyright © 2004, Emerald Group Publishing Limited