Given the host of environmental factors businesses contend with today, it comes as no surprise that managing demand is such a problem for many organizations.
Businesses have to compete in highly volatile markets where everything from bad weather to political uprisings can impact demand without a moment’s notice. This is further emphasized by the fact most firms have global supply chains that stretch across many international borders. Take for example the impact of the current European economic uncertainty: imminent decisions from European leaders could completely change the demand landscape. Likewise, the current growth in developing countries could just as easily place great strain on supply chains as businesses struggle to deliver to changing customer expectations. As a result, planning for demand can be a real headache for anyone involved in supply chain management.
Businesses operating in the spare parts or aftermarket industry will know all too well the effects of unexpected demand. Typically, firms in this industry offer anything from a few hundred lines to as many as a few hundred thousand. As a result the supply chain is under constant bombardment as demand for individual product lines changes constantly in response to shifts in the wider environment.
An unclear outlook of demand could mean that businesses are left in the dark as they try to piece together information to get an idea how best to respond to demand. Often this can be an expensive and time consuming process, distracting the business from more critical business issues. Spare parts companies could find themselves overwhelmed because there are simply too many items. Without effective tools to manage demand these firms could place themselves at the forefront of destruction. Failure to fully understand demand could leave firms at risk of over-stocking, potentially leading to liquidity issues or waste. Alternatively, at the other end of the scale, businesses may disappoint customers as they massively underestimate demand and find themselves in stock-out situations.
In order to protect the supply chain and maintain service levels, businesses must implement effective methods that both monitor and forecast demand. These systems should be able to take into account a range of factors that not only increase supply chain visibility but also allow for more effective planning. A thorough understanding of demand will enable a business to move forward from firefighting unexpected demand patterns to actively tackling supply chain problems head on.
There is no magic crystal ball that can tell businesses exactly when to expect sudden changes in their environment and how it will impact demand. However there are powerful analytical tools available that can increase visibility in your supply chain. Those businesses who adopt technology into their demand planning, will no doubt quickly realize the benefits of more effective demand management even in the most volatile of markets.