Importance of demand and supply analysis

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Importance of demand and supply analysis

It is characterized by emotional extremes like anger, despair, disillusionment, or even hopelessness. Seldom do we find a team excited or optimistic about their chances to improve demand planning processes. After two decades of process and technology refinement, excellence in demand management still eludes supply chain teams.

In fact, it is the supply chain planning application with the greatest gap between performance and satisfaction. For most teams, demand planning is a conundrum, a true love-hate relationship.

They want to improve the demand planning process, but remain skeptical that they can ever do so. In our research at Supply Chain Insights, we find that demand planning is the most misunderstood—and most frustrating—of any supply chain planning application.

While companies are the most satisfied with warehouse and transportation management, they are the least satisfied with demand planning. Teams are also confused about the demand planning process. They are unclear on how to move forward.


What drives process excellence is not clear. And well-intentioned consultants brought in to help achieve that clarity often give bad advice. In this article, we share insights on the current state of demand planning and give actionable advice that supply chain teams can implement to make real improvements.

Getting Past the Plateau The first use of the term supply chain management in the commercial sector was in Until that time, the focus of organizational improvement was on specific functional areas such as manufacturing, procurement, or logistics. In this article, demand planning is defined as the use of analytics—optimization, text mining, and collaborative workflow—to use market signals channel sales, customer orders, customer shipments, or market indicators to predict future demand patterns.

This forward period for demand planning will vary by company, but it is a tactical planning process typically stretching across the period of 10 months to 18 months.

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Note that as companies mature, the use of the forecast becomes more comprehensive and is woven into a number of processes culminating in a more holistic end-to-end process termed demand management. Today, there is a conventional view that as these applications evolved, companies have steadily reduced costs, improved inventories, and sped time to market.

The actual balance sheet results, however, show the opposite. Too few supply chain teams have successfully posted improvements to their balance sheets through demand planning initiatives.

Improvements were made in specific projects and in isolated parts of the business, but progress has slowed over the last 10 years resulting in a supply chain plateau. Growth has been slowing, inventories climbing, and costs escalating. Getting the basics right in the demand planning process is essential to moving supply chain results past the current plateau.

However, too few companies know what to do or how to do it. Evidence of this plateau is shown in Exhibit 1. In the process manufacturing sectors shown, where demand planning should make a dramatic difference, companies are going backward not forward in driving meaningful results.

Importance of demand and supply analysis

Ironically, most companies do not realize that they have reached a supply chain plateau because they have not looked at year-over-year financial balance sheet results. Take Your Supply and Demand Planning Software Survey The supply chain is a complex system that has grown even more complex over the decade.

Most companies understand that it is complex, but they do not see it as a complex system. In a complex system there are finite trade-offs between areas.

In the supply chain, these trade-offs include growth, costs, cycles, and complexity.

Importance of demand and supply analysis

Each supply chain has a unique potential based on the trade-offs of these factors.While the concept of demand-driven supply chains is relevant to all industries, the methods to get there can be quite different for different industries, with varying degrees of emphasis placed on demand-side and supply-side initiatives.

What is Supply Chain Management? Supply Chain Management,as defined by the world famous, Institute of Supply Management Inc., USA, is the design and management of seamless, value added process across organizational boundaries to meet the real needs of the end customer.

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Important Questions and Answers: Demand and Supply Analysis Demand. Demand indicates the quantities of products (goods service) which the firm is willing and financially able to purchase at various prices, holding other factors constant. Office, Retail and Industrial ii Table of Contents Table of Contents Fundamentals of Supply & Demand

Supply Market Analysis: definition and step-by-step guide : DeltaBid