Demand Driven Supply Chain Don’ts
Demand Driven retail/ wholesale companies stay ahead of the competition by focusing on three key areas in their supply chain. In addition, demand driven retailers and wholesalers know you will resist change and stay focused on sales and gross margin, failing to allow GMROI to impact operating decisions. Demand driven retail / wholesale companies understand you and the competition stay focused on fast profits, growing sales and increased customer counts without reviewing the cost of acquiring those customers or learning why existing customers didn’t spend more due to out of stocks resulting from lost sales. Demand Driven retail / wholesale companies know the things to avoid by watching the competition’s mistakes. Resisting change and staying focused on old business concepts and numbers doesn’t work in the marketplace anymore.
A large amount of statistics show that this isn’t always the best focus. Changing the focus to become a demand driven. business has shown to improve returns 27%, have 23% more inventory turns, and revenue growth of 26%, according to Gartner. With statistics such as these, many businesses are discovering the benefits of changing their focus to follow a demand driven strategy.
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“Demand-driven retailers balance operations and innovation excellence, while, at the same time, delivering an exceptional and profitable customer experience. Use this research to identify the demand-driven retailing strategies and capabilities retailers need to initiate a transformational journey.” Gartner analyst Mike GriswoldRead the blog Proof Improving Forecast Accuracy delivers a High ROI
A demand driven retailer must balance operations with innovation while delivering an exceptional customer experience. To achieve this, Gartner outlines the three keys to make a demand driven strategy work for retail success.
1. The Role of the Supply Chain
The role of the supply chain will be different for each business, and will evolve over time as a more demand driven focus is achieved. The supply chain roles should be clearly defined and align with the strategy in order to be successful.
2. Supply Chain Span of Control
In order to make a demand driven strategy work, a business must improve processes and broaden their span of control from the simple definition of their distribution center operations, transportation, and procurement. It should also include forecasting, replenishment, new product launches, and sourcing responsibilities. Taking this inclusion from suppliers all the way down to the store level of the supply chain is an ultimate goal in the strategy.
3. Establishing a Robust Set of End-to-End Supply Chain Metrics
Determining the success of performance takes two things – determining the right metrics and improving the flow of information to improve performance and using those metrics to improve sales and profitability. The key is to determine what the most important metrics are and improve your responses not only to stable demand patterns, but also to seasonal and trending demand. This is crucial to making your demand driven strategy work. The performance gaps caused by increased new product launches, changing promotional strategies, and the ability to reliably forecast across multiple channels is one that needs to be closed to improve performance.
Demand Driven Benefits
With the proven benefits of the demand driven concept, it should be a model that businesses of today should be adopting. However, many have not yet gotten on board with this idea. With the rapidly changing consumer habits and the changing retail marketplace, the importance of the demand driven model will continue to grow, making it even more important than ever for companies to change the way they do business. For more information on creating a demand driven strategy that can work for your business, contact us. We can help you transform your company into a demand driven retailer or wholesaler, ready for success in today’s market.
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