Rajesh Gangadharan has written an article at Supply & Demand Chain Executive discussing strategies for dealing with demand volatility. He does a nice job of laying out several options.

One of the major complications of dealing with demand volatility today is the fact that many supply chains are now supply networks based on the heavy use of outsourcing. The inability to respond quickly to demand volatility has an added ripple effect across partners in a supply network.

We’re fortunate enough to work with many very large manufacturers. What we find in common across all of them is that they all do a good job of planning, but still find a high number of problems they just can’t plan their way out of. Demand volatility falls into this category. These companies build the best forecast they can and constantly work to improve its accuracy. But, inevitably, as soon as they’ve settled on a forecast, something changes. Or, at the last minute, a major customer wants to change or drop-in a new order.

In response to these unexpected demand changes, these organizations have found that they must empower their people to respond. Unlike planning which tends to be a centralized process, responding to change tends to be quite decentralized. Front-line decision makers have to act, and to do so they need to know the current state of the business and what options are available. This requires collaboration with colleagues, often geographically dispersed and frequently including 3rd partners in the supply network, to figure out what is possible and what the impact of each proposed action would be on the business as a whole.

Our customers employ the strategies listed in the article, but also have invested in a strategic solution to respond to change by empowering their people with the information and tools to act quickly and decisively in the face of these changes. Without this, they risk poor customer satisfaction and poor operating results from higher inventory (as Rajesh mentioned), expediting costs, overtime, etc.

This entry was posted on Tuesday, February 6th, 2007 at 9:23 am and is filed under Best practices, Response Management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.