Successful manufacturing companies have several things in common. They all:
- Control costs
- Minimize inventory
- Strive to improve operational efficiency
But what's that one differentiating characteristic that truly sets the top leaders apart from the rest? It just might be how successful a company is at becoming demand driven.
Demand planning and forecasting are at the heart of manufacturing planning. Without the ability to forecast future demand, most product lead times would stretch out to unacceptable levels. So how do you actually go about forecasting future demand? Is it really that easy? Here are some tips to get you moving in the right direction:
1. Use Demand Forecasting Software
Today, by using demand forecasting software, your company can plan long lead items without flooding your production operations with unnecessary inventory. You can also work closely with key customers and your sales force to gain insight into potential demand—in addition to working with demand sensing techniques, POS data and shared repositories with information about the status of inventory at your key suppliers (or even the entire supply chain).
2. Optimize Your Entire Supply Chain
In the past, some companies attempted to minimize their own inventories and costs by forcing them further back to their suppliers. This technique doesn’t work in the long run. The demand-driven supply chain must be optimized for the benefit of all suppliers in order to work well. With the help of supply chain management software, you can better optimize your entire supply chain for the best results.
But to be truly demand-driven, it's important to unite operations and supply chain management with common goals. S&OP (sales and operations planning) is one technique for ensuring that everybody in your company is on the same page. This may also require changes to your company’s key metrics, employee incentives and even compensation models.
Supply chain management is a complex task even at the best of times and even with perfect information. The key to understanding how to control inventory is coordinating the objectives of every member of the supply chain and ensuring that every link in the chain is working toward similar goals. The demand-driven supply network requires visibility and a degree of openness between trading partners that exceeds what many companies are used to.
3. Open Communication with Customers
In addition to aligning your in-house team and suppliers, it’s crucial to be aligned with your customers' needs and objectives. Once again, this aspect requires open communication to ensure that your company can meet customer demands with reasonable inventory levels. It's important to have the right CRM tools in place to be able to view relevant information such as inventory levels, sales histories, shop orders and more so you can quickly answer customer questions and resolve issues using accurate, up-to-date information that's right in front of you.
4. Focus on High Impact Products First
It may not be possible for your manufacturing company to adopt a demand-driven approach with every product in your portfolio or for all products at the same time. It may make more sense to segment your products to identify the ones that would have the most impact right away. This might include products with the highest margins, shortest shelf life or in the early stages of the product life cycle. By focusing on high impact items first, you can enjoy much of the benefit of a demand-driven supply chain without as a high a level of effort.
In Conclusion...
If your company is looking to adopt demand-driven manufacturing, most modern ERP systems include capabilities for forecasting, high-level S&OP planning, supply chain management and customer service—and provide the visibility you need across your entire global supply chain. Armed with these tools, your manufacturing company can achieve the benefits of demand-driven manufacturing: reduced inventories, lower costs and happier customers. Given all this, it seems that adopting demand-driven manufacturing is the key to success.
