It is generally accepted that the traditional supply chain looks for efficiencies in production and logistics, and regards a truly optimised supply chain environment as its holy grail.
Today, that view is rapidly becoming irrelevant. As the supply chain becomes more demand driven – more responsive to the consumer – a more modern demand chain is emerging, championed by a group of early adopters.
The supply chain looks for cost efficiencies whereas the demand chain focuses on product effectiveness. Revenue generation – not cost – is the key demand chain driver. The focus is on longer-term planning and long-term capabilities – rather than short-term control and capacity constraints.
In the demand chain environment, processes are focused more on planning than execution. Manufacturing technology takes care of much of the execution process with manufacturing and ERP systems assuming commodity status.
For too long, the IT industry and the consultants that implement its products have claimed panacea status for the supply chain. Invest in it; build and extend it; optimise it – and all will be well, they tell the manufacturer. That message is no longer valid. As the majority of manufacturers already have one, it could be argued that traditional supply chain systems are moving towards commodity status – and there is little edge in that.
Fundamental changes in the consumer-manufacturer relationship will soon make the supply chain – as we know it – irrelevant. Increasingly, consumers are demanding ‘what they want, wherever and whenever they want it’. Responding to these demands will mean a big increase in the flexibility and diversity of manufacture.
The pressure from the customer is on manufacturing to replace the traditional supply chain with something faster and more flexible. Manufacturers wanting to remain competitive will have to respond – or pay the price. A new approach is needed. The supply chain is dead: long live the demand chain.