Demand-Driven Best Practices
Consumer goods (CG) industry leaders like Procter & Gamble are leveraging real-time data to drive demand-planning accuracy, improve manufacturing efficiencies and reduce obsolete product in the supply chain. Unfortunately, the advantages of a demand-driven supply operation do not come cheap. CG firms of all shapes and sizes are shoveling massive amounts of money, time and effort into their demand-driven initiatives. And as the leaders grow stronger in their ability to effectively sense and respond to consumer demand, the rest of the industry simply cannot afford to look the other way.
On May 23, 2006, CG executives convened at The Coleman Center in New York City for a second CGT Connects event, titled "Best Practices for Becoming Demand-Driven", sponsored by webMethods. There, they discussed pain points and lessons learned from their push to become demand-driven.
Noha Tohamy, principal analyst for Forrester Research, kicked off the event by defining the framework of supply network influence and discussed best practices of building internal, customer and supplier influence in supply chains. In addition, Mike Mastroianni, vice president of North American planning, reliability and operations for the Campbell Soup Company, took the stage to share the story of Campbell Soup's demand-driven transformation, and how it is now better able to sense and react to demand signals.
Exchanging Insight
Following the presentations, a group of 15 executives from leading CG firms participated in a candid roundtable discussion. Here's a sneak peak into what was discussed: 4Lack of system integration will stall your demand-driven initiatives. In fact, according to a recent Forrester Research survey, 40 percent of 168 respondents across the retail, manufacturing and distribution industries attributed integration issues as the No. 1 reason why technology tools experience poor user adoption. Attendees agreed that they need to find ways for disparate systems to better communicate with one another. And overcoming that challenge will not be resolved by technology alone. An organization's people and processes are critical components to making any system integration, as well as the integration of supply and demand, work. One roundtable participant recommended that CG firms first create a roadmap toward the end game of any system implementation and/or integration before embarking on the technology portion of the project. Managing expectations along the way is also critical as metrics for success may change as a project runs its course or as management changes within the organization. Some executives mentioned that projects should be required to show a return on investment within 12 months, but actually pulling this off remains highly idealistic.
Collaboration continues to be a sore spot, both internally across various departments and externally with trading partners and suppliers. Internally, organizational divide is derailing supply chain projects. In most cases, different functions in the areas of supply, demand or product are operating on different platforms/technologies, thus information sharing between departments is generally a highly manual and labor-intensive process. Companies must work to reconcile various demand signals so that departments across the board can sense and respond to a single demand signal.
Externally, trust (or lack there of) remains the key component (or inhibitor) to a successful collaborative relationship. Because most retailers lack a strong understanding of who their shoppers are and what they need, CG firms have an opportunity to come in and offer shopper specific research that will not only secure them as a valuable partner, but also influence and shape their category. Still, challenges exist , like private label competition, that can hinder an unguarded collaborative partnership. CG firms are hesitant to share sensitive information about new product development with even the most valuable retail customers in order to secure competitive advantage.
Sales forecasts are critical in the push to become demand-driven. Account managers are no longer simply salespeople as they are increasingly charged with creating their own forecasts and making decisions on site based on those numbers. A few companies in attendance mentioned that they are deploying incentive programs for sales team members based on the accuracy of their forecasts. However, asking account managers to be more analytical may lead to turnover.
4Benchmark your company externally and secure senior sponsorship. According to a recent AMR Research survey, the average company manages 15 internal manufacturing sites and 38 contract manufacturing providers across five supply chains in at least two continents. The fact of the matter is that supply chains are becoming increasingly complex. Companies looking to become demand-driven must assess their supply chains operations from top to bottom and then define unique measures for success and areas for improvement. You may find that processes are not necessarily broken, but that components may be only misaligned along the way. Also, gaining senior sponsorship is imperative in any business process change, especially in one as far-reaching as a supply chain transformation project. In fact, the common thread among those companies that are seeing a return on investment from supply chain management projects is that the head of supply chain chose to invest in tools that are now being leveraged. Most importantly, companies must keep in mind that there is no silver bullet to becoming a demand-driven company. You should expect a long and arduous struggle, but the benefits will be well worth it.
On May 23, 2006, CG executives convened at The Coleman Center in New York City for a second CGT Connects event, titled "Best Practices for Becoming Demand-Driven", sponsored by webMethods. There, they discussed pain points and lessons learned from their push to become demand-driven.
Noha Tohamy, principal analyst for Forrester Research, kicked off the event by defining the framework of supply network influence and discussed best practices of building internal, customer and supplier influence in supply chains. In addition, Mike Mastroianni, vice president of North American planning, reliability and operations for the Campbell Soup Company, took the stage to share the story of Campbell Soup's demand-driven transformation, and how it is now better able to sense and react to demand signals.
Exchanging Insight
Following the presentations, a group of 15 executives from leading CG firms participated in a candid roundtable discussion. Here's a sneak peak into what was discussed: 4Lack of system integration will stall your demand-driven initiatives. In fact, according to a recent Forrester Research survey, 40 percent of 168 respondents across the retail, manufacturing and distribution industries attributed integration issues as the No. 1 reason why technology tools experience poor user adoption. Attendees agreed that they need to find ways for disparate systems to better communicate with one another. And overcoming that challenge will not be resolved by technology alone. An organization's people and processes are critical components to making any system integration, as well as the integration of supply and demand, work. One roundtable participant recommended that CG firms first create a roadmap toward the end game of any system implementation and/or integration before embarking on the technology portion of the project. Managing expectations along the way is also critical as metrics for success may change as a project runs its course or as management changes within the organization. Some executives mentioned that projects should be required to show a return on investment within 12 months, but actually pulling this off remains highly idealistic.
Collaboration continues to be a sore spot, both internally across various departments and externally with trading partners and suppliers. Internally, organizational divide is derailing supply chain projects. In most cases, different functions in the areas of supply, demand or product are operating on different platforms/technologies, thus information sharing between departments is generally a highly manual and labor-intensive process. Companies must work to reconcile various demand signals so that departments across the board can sense and respond to a single demand signal.
Externally, trust (or lack there of) remains the key component (or inhibitor) to a successful collaborative relationship. Because most retailers lack a strong understanding of who their shoppers are and what they need, CG firms have an opportunity to come in and offer shopper specific research that will not only secure them as a valuable partner, but also influence and shape their category. Still, challenges exist , like private label competition, that can hinder an unguarded collaborative partnership. CG firms are hesitant to share sensitive information about new product development with even the most valuable retail customers in order to secure competitive advantage.
Sales forecasts are critical in the push to become demand-driven. Account managers are no longer simply salespeople as they are increasingly charged with creating their own forecasts and making decisions on site based on those numbers. A few companies in attendance mentioned that they are deploying incentive programs for sales team members based on the accuracy of their forecasts. However, asking account managers to be more analytical may lead to turnover.
4Benchmark your company externally and secure senior sponsorship. According to a recent AMR Research survey, the average company manages 15 internal manufacturing sites and 38 contract manufacturing providers across five supply chains in at least two continents. The fact of the matter is that supply chains are becoming increasingly complex. Companies looking to become demand-driven must assess their supply chains operations from top to bottom and then define unique measures for success and areas for improvement. You may find that processes are not necessarily broken, but that components may be only misaligned along the way. Also, gaining senior sponsorship is imperative in any business process change, especially in one as far-reaching as a supply chain transformation project. In fact, the common thread among those companies that are seeing a return on investment from supply chain management projects is that the head of supply chain chose to invest in tools that are now being leveraged. Most importantly, companies must keep in mind that there is no silver bullet to becoming a demand-driven company. You should expect a long and arduous struggle, but the benefits will be well worth it.