In the past years of 21st century, companies worldwide are trying to shift their focus from being linear to demand driven, in the supply chains. The driving motivation behind is cost effectiveness, responsiveness, develop an edge among their competitors & deliver the best value to customers. The end-to-end visibility lacks in the linear chain which up scales the swings in inventory as a response to changes in demand.
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In the past years of 21st century, companies worldwide are trying to shift their focus from being linear to demand driven, in the supply chains. The driving motivation behind is cost effectiveness, responsiveness, develop an edge among their competitors & deliver the best value to customers. Where did it all begun?
Numerous operational techniques have been evolved over the years. Poka-Yoke, Kanban, Lean Manufacturing, Kaizen, Just In Time & Six Sigma have been some of them that we often hear about. While all these tool & techniques are used to improve production efficiency, the production had been largely shaped on the push model. Producers and manufacturers have been driving products to the market and the products were pushed downstream at the customers end. The linearity of the predominant supply chain is very clear from this.
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The question arises "Who is a better decision maker of what and how much is required?". At this point in time the customer demand was added to the decision making process however the linear model gave birth to a very famous phenomenon that came to be known as the bull-whip effect. The end-to-end visibility lacks in the linear chain which up scales the swings in inventory as a response to changes in demand. Some qualifying and some quantifying Causes are available.
Now, companies are very clear that solely improving the efficiency would not suffice. Also a linear model to respond to demand has limited use, especially when the supply chains are converting in supply webs. Demand sensing & shaping is required to uphold and sustain a spirited advantage above the rest.
Turning to technology for a solution, IT strategies are adopted for Smarter Supply Chain of the future. Using ERP solutions, the retailing giants as well as other product and service suppliers are sensing the demand and stratifying the inventories/services available. Instead of having safety stock, psychic stocks are maintained. The aim of the push-pull stratification is to optimize the lead time among the different inventories according to demand variation. The demand-driven supply chain classifies inventories based on push-pull strategies, identifies real time sensing of demand and adds demand certainty to supply chain planning.
Transforming Supply Chains to be Demand Driven looks clear and sounds easy while we know no transformation comes without challenges. Available literatures on the same shows that major challenges faced by companies globally have more or less been identified. It gives a larger yet abstract picture of the reality as we know things change substantially with demographics.
The particular parameter this paper tries to measure is the visibility. Therefore the statement of the problem is:
"Visibility barriers to demand driven supply chain in Indian context"
Purpose of the Study
This research, therefore, is an attempt to identify challenges in being demand driven for Indian companies funneling through their suppliers, manufacturers, distributors, resellers and other business partners who form an essential part of the their supply chain. The main focus will be on measuring visibility since it comes out to be the top rated challenge globally and also as visibility is the foremost concern for being demand driven in any industry.
Significance of the Study
This study is significant in determining the gap between Indian & global scenario. On one hand literature review shows the results for global suppliers, distributors, manufacturers & resellers and participants of the supply chain, whereas on the other hand this research will map it to the Indian context.
C. K. Prahlad in his book "The new age of Innovation" mentions that the transformation of businesses are based on two pillars
Always on Time
Marked to Standard
The focus being on the individual customer experience. i.e. Behaving uniquely with every customer and not considering them as masses, N=1 (N representing each unique customer)
Using global resources in achieving this transformation, R=G (Resources=Global)
This research will also help in determining the extent up to which Indian companies have been able to achieve or are on the path of achieving this transformation. We can say so because the gap between the visibility issues, barriers and other transformation challenges will define the set of parameters that have the driving force for the same in reality.
For any research to be successful the most important part is the basic research plan and the data sources that will be used for analysis of the report. The purpose of the surveys and all the data's is to collect the primary data, which is the data, collected and assembled specifically for the research project in hand.
The purpose of the research here is to measure visibility barriers to demand driven supply chain in Indian context. The basic question highlighted is: Which parameters effect the visibility of a supply chain?
The review of literature is based on the findings of different institutions and companies that have been involved in the process of demand driven supply chain and contributing to the field of operations.
The concept of DDSN (Demand Driven Supply Chain) was first cited in the year 2004 by AMR research. It lists companies that top the list in terms of supply chain. Winners include Dell, Nokia, P&G, IBM, Wal-Mart Stores, Toyota etc. These companies have found to be a forerunner in the context of being demand driven in their supply chains/network/web.
So what exactly is a demand driven supply network or a chain?
Demand-driven supply networks are driven from the front by customer demand. Instead products being pushed to market, they are pulled to market by customers. It does not eliminate the ability of a company to push product to market but adds that companies in a supply chain would be working closely to shape market demand by sharing and collaborating information. In doing so, they will have greater and more timely visibility into demand. The aim of this collaboration is to better position everyone with the ability to more closely follow market demand and produce, in tandem, with what the market wants. Rather than replace the force of pushing, product to market, the DDSN strategy is to match a pull from customers with an equal and opposite push from supply chain members. Instead of leading the market from a push and artificially inducing unsustainable market demand, the concept behind DDSN is to react in tandem with demand. The methodology behind DDSN is to bring the supply chain eco-system into balance.
There are three consumer trends that have seen a revolutionizing change and decisively impacted consumer product and retail supply chains:
1. Consumer Diversification
Dramatic demographic and lifestyle changes, along with economic turmoil, has nullified the ability of traditional techniques to build consumer purchase databases, the irrelevance in the shopping trends compounded an explosion in the size of organized and unorganized goods has converted the well known trend of mass markets to "variable niche markets".
2. Consumer Polarization
A single customers buying trend will both tend to extremes of "new luxury goods" and "mass value" purchases. The "mid-level customer" is now extinct, and companies which provide mid-level quality at mid-level prices are at the forefront of this breakdown. The same customer who wouldn't pay for a Rs 50 espresso, would still pay Rs 50 lakhs for a top-of-the line sports car, just because it makes them feel good about themselves.
3. Mass Retailers
Wal-Mart and Tesco, have successfully captured and consolidated the "mass value" segment of customers. Capturing the bottom of the pyramid has now realized into effortless revenue creation on negligible marketing costs but a resilient, efficient supply chain network.
The rest of the companies either capture the "luxury goods" segment or fail to capitalize on either, and face the losses while still trying to capture the "mid-level customer".
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The primary solution to this problem or rather lack of control, is empower the right people who can respond rapidly and effectively in critical points, to ensure constant supply network changes don't cause "a bull-whip effect" and to de liver superior operations performance. To effectively manage the volatility in demand, organizations need to accept the demand-driven nature of supply chain networks and importance of DDSN (Demand Driven Supply Networks) - as a system and network of techniques and processes that realize and respond to real-time variations in demand across a network of customers, suppliers and organizational employees.
The outlined multi-dimensional trends realized in the industry, notice the shifts in supply chain management which defines that Supply Chains extend beyond the physical boundaries and reach of the core business processes and organizational environment. The "Outsourced competency model", which relates to the most efficient utilization of the organization's core competencies, root business processes and offloading the rest as much as possible. Hence the evolution of these organizations into "business eco-systems" consisting of tightly linked specialized trading and supplying partners. The competency and effectiveness of this interwoven supply-chain depends not only on the organization defining the core-process but all major and minor components that build up the supply chain.
â€¢ Traditional humanized SCM techniques have no outlining advantage in the new environment; Organizations have mastered the methods to effectively manage the machines but often stutter at managing their supply chain relationships, specifically, for non-strategic and non-critical suppliers. Abnormalities in data handling and filtering amongst smaller vendors, along with quality checking for them are an undermined and unchecked area.
The issue with the "business ecosystems" is that the human nature of risk is independent of all metaphysical processes. Key inbound and outbound processes such as purchases management, warranty fulfillment, customer risk management and order forecasts cannot be outsourced, as they would lead to loss of control and focus.
Now having known what being demand driven is and the driving forces behind it, let us take a look at the what information do we already have in the area of our research; before we present our own inferences.