The demand
driven supply chain is a
retail optimization model
developed and made popular
by AMR Research. AMR defines DDSN
as a system of technologies
and processes that sense
and react to real-time demand
across a network of customers,
suppliers, and employees. AMR
benchmark research shows
that those who do not implement
supply chain improvement
have an overall cost disadvantage
of 5% of revenue due primarily
to poor forecasting an in-stock
performance. (see AMR Research
Report "Hierarchy of
Supply Chain Metrics: Diagnosing
Your Supply Chain Health,:
Feb 2004).
An article
by author Enrique De Argaez
summarized the main advantages
of DDSN as: (a) participants
in the supply chain are
all able to take part in
shaping demand as opposed
to merely accepting and
reacting to it. Where vendors
traditionally had little
or at least latent visibility
into market demand, the
collaborative technologies
employed in implementing
DDSN have the overall effect
of reducing and even eliminating
the gap between upstream
business and the end customers.
This gives more accurate
and timely insight into
market trends which increases
the accuracy of forecasting
and supports better in-stock
performance.
This type
of market intelligence impacts
more than just a vendors
ability to plan operations;
it translates directly into
reduced inventory holdings
across the supply chain,
which in turn, means an overall
reduction in the amount of
capital invested and therein
all the associated carrying
costs.
Research
shows that companies who
are best in class as demand
forecasting average 15% less
inventory, 17% stronger perfect
order performance, and 35%
shorter cash-to-cash cycle
times.
As
a vendor a first step in
becoming demand driven
is to gather and analyze
retail POS data. Without
the proper tools this can
be a time intensive process. [see
outsourced POS analysis] But
with the right tools a
vendor can accept multiple
retail POS data feeds from
their retail customers
and begin to understand
item sales and inventory
on a store by store basis.
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