DEMAND MANAGEMENT
AND CUSTOMER
SERVICE
1
Demand Management
Defined as focused efforts to estimate and
manage customers demand, with the intention
of using this information to shape operating
decisions.
Recent practice has been just the opposite, with
the manufacturer determining the what, where,
when, and how many of the sale.
Demand Management
It is this disconnect between manufacturing and
the demand at the point of consumption that
attracts attention to demand management.
Any attention paid to demand management will
likely result in benefits flowing through the
supply chain.
Demand Management
Demand management takes supply chain management
to the next level by enabling an automated ecosystem
that simultaneously maps demand forecasting against
factors like supply restrictions, customer commitments,
inventory counts, financial predictions, as well as
patterns of behavior that can affect demand at any given
time.
Demand management is a more proactive approach
than its predecessors relying on highly sophisticated
quantitative analytics and advanced modeling
techniques to preset tolerance levels, predict and
pinpoint problem areas, monitor and adjust strategies
dynamically, and achieve real-time visibility and synergy
across all channels.
Demand Management Objectives
Gathering and analyzing knowledge about
consumers, their problems, and their unmet
needs.
Identifying partners to perform the functions
needed in the demand chain.
Moving the functions that need to be done to the
channel member that can perform them most
effectively and efficiently.
Demand Management Objectives
Sharing with other supply chain members
knowledge about consumers and customers,
available technology, and logistics challenges
and opportunities.
Developing products and services that solve
customers problems.
Developing and executing the best logistics,
transportation, and distribution methods to
deliver products and services to consumers in
the desired format.
Demand Forecasting
A major component of demand management is
forecasting the amount of product that will be
purchased by consumers or end users.
In the integrated supply chain all other demand
will be derived from the primary demand.
A key objective is to anticipate and respond to
primary demand as it occurs in the marketplace.
Demand Forecasting
Demand forecasting is essentially a linear
process of translating input assumptions into a
forecast of expected sales; demand
management, on the other hand, is a highly
iterative process that involves driving to a
revenue and profit target through prioritization of
customers, channels, products, geographies
and the demand stimulation programs available
to the enterprise.
Demand Forecasting
Keeping inventory levels low, costs down and
customers happy in a Web based, now largely
global marketplace requires companies to
proactively forecast and manage supply and
demand dynamically supported by best-of-
breed techniques, technologies and practices.
Today, this calls for a delicate balance of art,
science and technology.
Demand Forecasting
Numerous forces, some of which overlap, must
come into play:
Internal The brand; market segment; product mix;
corporate culture; sales performance; geographic
presence, and customer satisfaction levels
Economic The industry; the business climate;
market share; financial performance; unemployment
rates, and IT expenditures
Technological Current install base;
hardware/software changes; price/performance vs.
competition, and benchmarks.
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From Planning to Managing
Demand planning has enabled companies to more
accurately forecast what their industry, market and
customers will require.
This is not a new concept, but for first-generation
Internet-dependent enterprises, demand planning has
permitted them to link and integrate processes across
networks; enable closer collaboration among previously
isolated parties; respond dynamically to market and
consumer trends, and deliver a better, more rewarding
experience across the value chain.
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From Planning to Managing
Armed with advanced tools, technologies and
forecasting methodologies, businesses have honed their
ability to view numbers and predict information within
various contexts, model independent and dependent
demand among products and channels, and generate
statistically based forecasts based on the most recent
data, causal factors and events.
This has helped fulfill the demands of a more
challenging customer base; better leverage past product
performance; more effectively predict and manage
replenishment; align price and profit margins; and
maintain a leaner, more profitable supply chain overall.
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Forecasting and responding
in real-time
Organizations looking for an effective demand
management model should seek a Web-based solution
that provides high levels of scalability, economy,
usability, availability, synergy and functionality.
Such a platform should support a real-time feedback
loop that is designed to enable an enterprise to
dynamically forecast against a number of variables,
such as supply, customer orders, inventory, and financial
objectives.
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Collaborative Planning, Forecasting, and
Replenishment
CPFR is recognized as a breakthrough business
model for planning, forecasting, and
replenishment.
Uses available Internet-based technologies to
collaborate from operational planning through
execution.
Developed by Wal-Mart and Warner-Lambert in
1995.
Collaborative Planning, Forecasting, and
Replenishment
Emphasizes a sharing of consumer purchasing
data among and between supply chain partners.
Creates a direct link between the consumer and
the supply chain.
Collaborative Planning, Forecasting, and
Replenishment
The plan and the forecast are entered by
suppliers and buyers into an Internet accessible
system.
Within established parameters, any of the
participating partners is empowered to change
the forecast.
Only a few CPFR initiatives have been made
public, but results are impressive.
A comprehensive demand management
solution
A comprehensive demand management solution should
enable a business to:
Synchronize global planning
Forecast only the products and components that make sense
from a profit and/or strategic perspective
Utilize best-of-breed statistical forecasting techniques
Employ a forecasting tool that balances performance and
scalability
Apply event-based planning
Perform real-time data synchronization.
Employ rules-based modeling
A comprehensive demand management
solution
Simplify multidimensional analysis with easy-to-use tools
Afford a seamless workflow
Benefit from an open, services-based, 64-bit architecture and
a common Web interface
Utilize industry-standard databases
Employ automated, closed-loop, industry-specific workflows
based on best practices
Gather predictive intelligence with proactive demand
indicators
Enable more efficient collaboration with all internal
stakeholders and external partners.
Order Fulfillment and Order
Management
Order fulfillment activities differ as a supply
chain matures through transactional to
interactive to interdependent levels.
Typical Order fulfillment cycle involves five
activities:
Order Transmission
Order Processing
Order Selection
Order Transportation and
Customer Delivery
Order Fulfillment and Order
Management
Order-management systems represent the
principal means by which buyers and sellers
communicate information relating to individual
product orders and is key to operational
efficiency and customer satisfaction.
Order-Management Functions
Customer Service
Customer service is often the key link between
logistics and marketing.
Customer Service
Defining customer service
In terms of levels of product
In terms of types of customer support/service
In terms of levels of involvement
In terms of complexity of customer service
Customer Service
Elements of Customer Service
Time
Dependability
Cycle time
Safe delivery
Correct orders
Communications
Convenience
Customer Service:
Performance Measures
Traditional
% availability in base units
Speed and consistency
Response time to special
requests
Speed, accuracy, and
message detail of
response
Response and recovery
time requirements
Response time, quality of
response
New
Orders received on
time
Orders received
complete
Orders received
damage free
Orders filled
accurately
Orders billed
accurately
Customer Service: Overview
If the basics of customer service are not in
place, nothing else matters.
Customers may define service differently.
All customer accounts are not the same.
Relationships are not one dimensional.
Partnerships and added value can lock up
customers.
Stockouts
Four possible outcomes from a stockout
Customers wait
Back orders
Lost sales
Lost customers
