For food and beverage manufacturers, aligning your business to be “demand-driven” means aligning both demand and supply trading partners as part of a new business model, in an industry that deals every day with unique business processes and requirements. This series of columns highlights practical guidelines to help you identify opportunities, as well as benefits, around delighting your customers with improved perfect order performance.
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Explore this issueApril/May 2006
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By recognizing and responding within your organization, as well as with upstream and downstream supply partners, you can more competitively position your entire supply chain and expand your ability to provide higher levels of customer service, for a positive impact on profitability and significant added business value.
For food and beverage manufacturers, there are added levels of complexity when applying a demand-driven business approach to delivering perfect order performance within your overall supply chain. Given the most basic goals, to deliver consistent product quality on time, for the right price, based on both customer and internal targets – all while using nature’s less-than predictable ingredients (and often perishable state) – requires added levels of operational management, visibility and control. They must adhere to government regulatory controls while handling, processing, and moving raw ingredients, intermediates, and finished products. This includes managing the planning and production of primary products with demand “pull,” as well as resulting by- and co-product inventories that occur during processing, and which may have no immediate sales demand.
So food and beverage manufacturers who want to improve the performance of their demand-driven supply chain, to deliver more consistently against the perfect order goal, must address both products and processes. In a market legendary for razor-thin margins, and with the added goals of providing value-add customer services and improved velocity to meet short-term demand and supply changes, the challenges of aligning a demand-driven supply chain in the food and beverage industry begin to emerge.
The notion of a demand driven supply chain is based largely on one central goal – changing a manufacturer’s view of its own business processes, as well as its relationships with fulfillment partners, in an effort to provide more flexible and responsive product delivery, and a new level of customer service. This new service level goes beyond the timely delivery of products sitting in inventory, waiting for customers’ sales orders. It includes aligning business processes to manage demand and supply activities both within and beyond the four walls of manufacturing – outside one’s own organization. This means relating to your customers – and their customers – in a whole new way, from forecasting and planning, through fulfillment of sales orders, given unexpected changes in both planned and actual demand. This is achieved by setting inventory supply levels based on the end customer’s evolving needs – not just on targeting static “make-to-stock” product forecasts with fixed inventory stocking levels.
To improve your entire supply chain’s ability to sense and respond to demand, you can improve the timeliness and accuracy of forecasts and better manage inventory replenishment by improving production material and capacity planning, and be more responsive when promising customer delivery for sales orders, based on an accurate actual demand/supply picture. Manufacturers who adopt this new demand-driven business model stand to gain a distinct competitive advantage within their overall marketplace. And while food and beverage manufacturers greatest assets are usually thought of as being its plant people and equipment, by far the greatest assets reside outside the plant walls, in customers.
Understanding and Focusing on Planned Customer Demand
In a demand-driven culture, the forecast drives demand for the entire supply network. It dictates capacity and production planning at the factory, and material planning and purchasing to support production. It also drives warehouse replenishment and distribution center planning.