Adopting demand driven logistics can increase visibility, drive supply chain efficiency, and offset any market advantage your competitors might have.
Shippers in today’s economic climate face myriad challenges over which they have little or no control: consumer behavior, fluctuating fuel costs, supply chain disruptions, and capacity and labor availability. Many of these variables are, at best, difficult to predict. Consequently, they force supply chains to function reactively.
But companies don’t have to follow the herd. As much as market volatility breeds complacency and risk-averse decision-making, it also raises the stakes for shippers to seize control of their supply chains where there are opportunities to do so—to identify, anticipate, manipulate, and manage change, and leverage this demand responsiveness as a competitive differentiator.
Adopting Demand Driven Logistics
Adapting demand driven logistics principles empowers shippers to drive collaboration across different functional areas; engage customers, suppliers, and third-party intermediaries more closely; and broadly drive out costs and inefficiencies within their supply chains.
By controlling decision-making and dictating actions downstream from origin, companies grow more responsive to demand and nimble to change. It allows them the structure to optimize what is known, and the flexibility to adapt to countless unknowns. Visibility is a key enabler in this paradigm shift. Yet it also remains a sticking point.
Typically, the first pain point shippers face is visibility to control their inventory and react to different situations. The secondary consideration is cost.
When companies don’t have visibility to inbound flows, or can’t align supply to demand signals, costs can quickly spiral out of control.
Transportation management systems (TMS) and supply chain visibility tools provide shippers with a common platform to share information and manage transportation and logistics processes throughout the network. Having data in one repository that feeds upstream planning and analysis helps facilitate demand-driven logistics. While companies are using technology to move in this direction, control remains elusive for many businesses.
Demand driven logistics has not yet been widely adopted. Shippers may manage only certain subsets of inbound materials procurement.
Without a true demand driven vibe coursing through the supply chain, shippers are likely to adapt parts, rather than optimize the whole. Companies struggle when individual functions aren’t in sync—a lack of alignment creates slack in the form of additional inventory, time, and cost.
Most companies successfully manage outbound transportation and distribution processes, largely because they directly impact the end customer. When something goes awry, there is an immediate and obvious consequence. With a demand-driven logistics approach, impacts are more subtle, and build gradually over the entire order cycle. That’s why it requires a holistic perspective, and often a paradigm shift within the organization—one that likely doesn’t occur without executive mandate or a push from 3PLs.
The Power of Pull
Sometimes the ability to successfully run a demand-driven operation depends on whether a strong enough stake exists within the enterprise to control the inbound supply line. If the top of the organization isn’t interested in inbound logistics or procurement, it becomes a moot point. Once you get past that obstacle, it comes down to having the technology to evaluate how best to create visibility and control.
Transportation is an obvious flash point for companies that struggle with supply chain visibility, simply because transport costs have a tendency to creep. By contrast, when shippers are able to accurately forecast demand farther out, they have more flexibility to mix and match transportation options to meet their need.
For shippers and consignees sourcing globally, failing to communicate with upstream partners can create any number of inefficiencies and costs. That’s why companies are driven to reach deeper into the supply chain and work more closely with suppliers and manufacturers to fine-tune production systems and make sure they are in lockstep with downstream processes.
Additional Reading on Demand Driven Logistics
About the Author, Chuck Intrieri
Chuck Intrieri is the owner of Charles M. Intrieri Consulting in Orange County, CA. Chuck specializes in Supply Chain Optimization, Third Party Logistics (3PL) and International Purchasing and Importing Consulting. He also writes for THE GOOD WORD, LinkedIn and other Supply Chain Blogs. He is a guest speaker at the Purchasing Management Association and the University of Wisconsin-Madison. He is certified as a C.P.M.,CPIM, and Value Engineer. Click here to view Chuck Intrieri’s Expanded Bio