The Opportunities and Challenges of a Demand-Driven Supply Chain

The Definition

A demand-driven supply chain (DDSC) is one method of supply chain management which involves building supply chains in response to demand signals.

In comparison with the traditional supply chain, DDSC uses the pull technique. It gives DDSC market opportunities to share more information and to collaborate with others in the supply chain to increase market share profitably

The Goal of DDSC

Increase Market Share

Profitably

Increase Market Share

Profitably

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What are the key

ingredients?

The 1st Case Study – Apparel

A manufacturer of women’s dresses receives spreadsheet/distribution orders from the buyer

Analyzes the breakdown and calls back the buyer to change the distribution

Buyer approves based on past performance

Step 1 - The Foundation

Supply Chain Visibility

Vendor Merchandise Management

Retai

ler

Vendo

r Increase Market Share

Profitably

Increase Market Share

Profitably

Time/Degree of Trust and Complexity

Benefits

Case Study #2 – Health & Beauty

A brand name cosmetic company is having difficulty meeting their fill rates

Their customer offers a special VMI program Vendor re-engineers order management processes

based on the VMI program Vendor improves fill rates resulting in increased sales

Case Study #3 – Apparel

Manufacturer in children’s wear Receives PO from buyer with a three month lead time Shipment arrives but buyer calls to cancel PO Vendor analyzes PoS data from past performance Vendor offers buyer the goods under “Guaranteed Sale”

terms and defines the distribution that will meet sell through rates

Vendor sells more under Guaranteed Sale but at higher margins

Step 2 - Awareness

Supply Chain Visibility

Vendor Merchandise Management

Retailer Compliance

Retailer Supply Chain Programs

Time/Degree of Trust and Complexity

Benefits

Retai

ler

Vendo

r Increase Market Share

Profitably

Increase Market Share

Profitably

Case Study #4 – Food / CPG

An agent for an Italian pasta brand wanted to maximize their profitability

Held very high in-stock position but had to absorb mark downs to meet sell through rates

Used PoS to identify stores with the heaviest mark downs

Optimal reduction in inventory to maximize profitability while being compliant

Step 3 – Focus on YOUR Priorities

Supply Chain Visibility

Vendor Merchandise Management

Retailer Compliance

Retailer Supply Chain Programs

Reconcile Conflicting Supply Chain Goals

Time/Degree of Trust and Complexity

Benefits

Retai

ler

Vendo

r Increase Market Share

Profitably

Increase Market Share

Profitably

Case Study #5 – Seasonal Goods

Vendor of Christmas accessories had a sold-out season

Buyer gladly allocates the same budget for next year but vendor recommends to double it

Buyer refuses because of budget constraints Vendor leverages consignment program Sales double and order-to-cash was reduced

Case Study #6 - Apparel

Manufacturer of women’s wear measured their cash-to-cash cycle when importing product

Moved manufacturing domestically Only interested in consignment and/or guaranteed

sale programs Resulted in higher margins, less inventory, and

reduced cash-to-cash cycle

Step 4 – Optimize Performance

Supply Chain Visibility

Vendor Merchandise Management

Retailer Compliance

Retailer Supply Chain Programs

Reconcile Conflicting Supply Chain Goals

Asset Management

Time/Degree of Trust and Complexity

Benefits

Retai

ler

Vendo

r Increase Market Share

Profitably

Increase Market Share

Profitably

Conclusion

These key ingredients are critical in executing an effective DDSC in order to gain a competitive advantage and become a superior performing vendor

Q & A