104 Supply Chain World SPRING 2014

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IN THIS SECTION106 DIXON TICONDEROGA CO. | 110 SPYDER ACTIVE SPORTS | 113 GERBER CHILDRENSWEAR | 116 BEALLS INC. | 118 CRABTREE & EVELYN 120 HELLY HANSEN

Siloed decision-making and a lack ofeffective communication and collabo-ration drive up costs, increase buffersof inventory and disappoint cus-tomers. Many supply chain policiesand processes attempt to compensatefor information latency and demanduncertainty. A significant opportunitylies in attacking lead times and infor-mation latency while getting everyonecloser to the demand signal at the fur-thest point of consumption.

By removing information latencyand synchronizing supply and demand– what we call “Demand Driven SupplyChains” (DDSC) – forward-thinkingcompanies are better synchronizingplanning, procurement, production,replenishment and marketing acrossthe product lifecycle and the valuechain. The benefits are real: improvedrevenue lift, lower operating costs, andimproved cash flow are the tangibles.Perhaps most importantly, customersatisfaction improves dramatically.DDSC enables companies to becomemore strategic and more competitivewith customers and suppliers alike. Itis a game-changing opportunity.

From Chains to Networks

The full benefits of DDSC come fromviewing the extended enterprise as anetwork, sharing critical supply anddemand information across the net-

work of suppliers and customers.Companies with a networked DDSChave more balanced cash flow, experi-ence one to four percent improvementin revenue, and see 20 to 30 percentreduction in working capital.Companies with advanced visibilityand collaboration also claim that sup-ply chain resiliency improves.

We have seen increased investmentin DDSC capability build-out by com-panies in virtually every industry.Since there is only so much improve-ment they can make within their ownfour walls, supply chain executives arelooking for better alignment of infor-mation and decisions across bound-aries with supply chain partners.

DDSC Characteristics

There are a number of key capabilitiesthat distinguish demand-driven supplychains from traditionally managed ones:

+ Product movements – replenish-ment – driven by actual demandor consumption.

+ Inventory managed to dynamictarget operating levels – movingfrom static inventory policies toones adjusted real time based onchanging demand/supply signals.

+ Single demand signals sharedacross partner tiers.

+ Planning and analytics tools usedto drive more predictive process-

es with improved demand signalmanagement and responsiveness.

+ Multi-enterprise collaborationtechnology – often cloud-based –to manage processes and infor-mation flow across the supplychain as one virtual organization.

+ Early detection of supply ordemand continuity issues.

The Journey

One critical lesson learned from helpingclients become more demand-driven isthat supply chain executives must planand manage the journey carefully. If youcould remove all information latency inyour supply chain, what would youchange? We’d bet you’d change mosteverything. Successful DDSC initiativesstart with that vantage point.

Being demand-driven can only beachieved through a well-structuredcapability build-out and roadmap. InDDSC transformations, costs, invest-ments and benefits are balancedthroughout. A key factor is enticingcustomers and suppliers to join. It isimportant to convince them of thebenefits they can achieve by collabo-rating. Successful programs establish ashared benefits model with partnersallowing both sides to provide input tothe future state process and relatedmetrics. This, along with effectivecommunication, training and supportcan often drive 100 percent participa-tion in a DDSC transformation.

Anticipating potential pitfalls is alsoimportant. DDSC requires all partiesto expose more operational data out-side their four walls. Data must beclearly defined and integrity is key.

As customers and markets growmore demanding and supply chainsglobalize, maintaining transparencyand ensuring responsiveness is criti-cal. Demand-driven supply chains arethe answer.

Driven By DemandB Y K E V I N O ’ L A U G H L I N A N D R O B B A R R E T T

Information latency – the time lags that occur in transmitting supply,demand and financial information within the organization and acrosssupplier tiers and customers – is one of the most significant drags on sup-ply chain performance. The bullwhip effect, as illustrated in the classic sup-ply chain simulation “The Beer Game,” is a real phenomenon we see inalmost every supply chain we work in.

R E TA I L S E CT I O N

SPRING 2014 Supply Chain World 105

Kevin O’Laughlin is an Advisory Principal in theStrategy and Operations group of KPMG LLP. RobBarrett is an Advisory Managing Director in theStrategy and Operations group of KPMG LLP.