STUDENTS' CORNER - 129

Strategy 2 for effective supply chain management: Dynamic demand-focused planning

As we said earlier, the executives must have a good efficient understanding of the demand in the market. It implies that they should be aware of the demand-related issues. Demand has potential risks and the executives must be aware of the risks the products of his company are likely to face and fight. 

Since demand and risk are closely linked with each other, let us spend some time on the risk factor.  Risk essentially means an unpredictable future result; decision is taken in a way with inadequate information since decision has to be taken and the result may turn out to be profitable or its opposite. In fact, when attempting to arrive at demand level for a product, the usual practice is to look into demand forecast and very often, the demand forecast ends up fairly dependable. At times, the forecast turns out rather unfair and incorrect. In such a situation, there is a gap between the demand forecast and the actual demand and this gap becomes the very source of risk related to demand.

The total experience of businesses knows all the falls and dangers they have to tide over and many a time, business experience has real knowledge to face such market shocks.  It has survived different risks such as excess demand, latent demand, and seasonal demand, so on.  Marketing experts have generally knowledge and experience of dealing with such market variations. Experience and unbiased analysis of the experience are the essentials of expertise in any field. Therefore, the executives with live business insights remain alert to the shifting of demand picture and plan accordingly in such a way that they do manage to get things required for the business in time and in the right quantity. They constantly fine-tune their operations according to the needs of the market and this timely fine tuning is a good strategy for supply chain management.

Fine tuning does not mean it is done at a regular interval; on the other hand, it must be almost every day as a necessary commercial response to the changes in the market. Fine tuning also involves changing production schedule without waiting for the month end. Alertness to the changing faces of the volatile market knows no rest or postponement of any critical decisions.

Critical decisions cover changing supplier if he does not match with your agile operations so that you do not suffer from supply short-fall. Of course, exploiting the technological innovations need not be stressed because without technology orientation, no business can afford to thrive.

Thus, dynamic planning based on the demand and the market is another essential strategy in the management of supply chain.

We will discuss another strategy in our next session.