4th step : Qualify the customer demand
11-05-2020
  • Events

The fourth article of our series to be prepared for the Supply Chain's restart around six priority actions. After creating transparency and identifying the wealth of the value chain, it will now be the stake of qualifying customer demand, indeed, the most critical task for our supply chain managers.

A crisis could increase or decrease the demand for some product family, where you have to guess the realistic orders of the end customer, which is more complicated and more critical. Companies' managers must ask themselves if the demand's signals they received from their customers, in the short and medium-term, are realistic and reflecting the uncertainties of the forecasts. The demand planning team, using its industry experience and available analysis tools, should be able to find a reliable demand signal to determine the supply needed (the outcome of which should be discussed and agreed in the part of the Sales & Operation process (S&OP)). 

Besides, direct communication channels with the customer, market trend, internal and external databases can provide valuable information to assess the current state from the customers' demands of your customers. 
When data sources are limited, open communication with direct customers can fill at least some gaps. With these factors in mind, demand planning requires a strict process to navigate in uncertain and ever-changing conditions successfully. 
To adequately prepare for such situations, organizations must take into account the following steps:

  • Develop a demand forecasting strategy, specifying the granularity and the time fence horizon of the forecast adapted to decisions related to the risks of the current situation
  • Use as much as possible exogenous' data for your business to generate a realistic forecast of primary demand.
  • Integrate the commercial information of your customers into your forecasting models.
  • Ensure dynamic monitoring of forecasts to react quickly to inaccuracies.

Many end customers are engaging in shortage purchases to ensure that they can claim. A higher fraction of what is in shortage, companies can reasonably ask whether the demand signals they are receiving from their customers immediate, short and medium-term, are realistic and reflect the underlying uncertainties of the forecasts. 
Placing smaller and more frequent orders within relaxing contractual terms can improve results for both suppliers and their customers by mitigating peaks and off-peak that increase costs and waste.

Prioritization process that ranks customers in order of strategic importance, margin, and revenue would also help maintain the continuity of business relationships with specific customers.

To sum up, our supply chain managers must get closer to their customers and understand the demand generation mechanism. 
In the coming period, the link with the commercial and marketing functions is essential. 

 

Philippe Bornert, AGILEA CEO

 

To find the previous articles : 

1ST STEP: TRANSPARENCY & VISIBILITY DURING THE RESTART PHASE

2ND STEP: THE STATUS OF THE WEALTH

3RD STEP: ASSESS THE MATERIAL RESOURCES IN YOUR SUPPLY CHAIN