Is it Supply Chain or Demand Chain?

May 17, 2016 © Copyright Glomacs

Have you thought about this question; do you appreciate the difference between Supply Chain and Demand Chain? Is it relevant to you and your role in your organisation?

This short blog will try to answer these questions giving you the knowledge to consider whether you should make any necessary changes to how you work, both internally and externally.

Let us try to explain the two terms, Supply Chain and Demand Chain. 

Is it Supply Chain or Demand Chain?Supply Chain is where the producer or provider pushes goods and services along the chain in the direction of the final consumer. There may be a number of stages after the producer has released the goods or services. The Supply Chain implies large stocks in case there is demand.

Imagine for example that you are producing watches; these go into a warehouse after production and are despatched to a wholesaler, then to a retailer. At each stage there may be add-ones such as packaging, advertising, etc. So there is a push of products and services with an expectation that the customer wants them, but they may not. This process is called forecast driven which implies that there is stock sitting in the supply chain waiting for a customer demand

Demand Chain on the other hand relates to the customer demanding products or services as and when they are required which is referred to as a pull. This process is called demand driven where customers demand products and services promptly. A Demand Chain will require a long lead time where the demand goes back to the producer with the delay of production and further delays in delivery. 

The supply process implies high stocks, which does go some way to meeting the requirements of the customer though has associated high costs. The demand process on the other hand does not meet customer service expectations of availability though does have lower costs.

What is needed is a compromise or a closer relationship between the producer and the customer. There are a number of ways to achieve a satisfactory outcome and profitability, this short blog does not have the space to explain them all. Key ones are as follows:

  • A greater relationship and understanding between the producer and the customer
  • Agile organisation – becoming more responsive to customer demand
  • Postponement – delay the commitment of a product to its final form or location for as long as possible
  • Information – improve information across the complete chain, making it visible for all parties

These suggestions will not be easy to incorporate as they are not a quick fix. Organisations have to start somewhere; these four areas would give significant, positive results. Global world-class training providers Glomacs (based in the UAE) provide public and in-house training courses for supply chain personnel at every level. Now is the time to develop your people performance by anticipating the improvement in the economic situation within the global marketplace.

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