The Opportunities and Challenges of a Demand-Driven Supply Chain

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The Opportunities and Challenges of a Demand-Driven Supply Chain

  1. 1. The Opportunities and Challenges of a Demand-Driven Supply Chain
  2. 2. The Definition <ul><li>A demand-driven supply chain (DDSC) is one method of supply chain management which involves building supply chains in response to demand signals. </li></ul><ul><li>In comparison with the traditional supply chain, DDSC uses the pull technique. It gives DDSC market opportunities to share more information and to collaborate with others in the supply chain to increase market share profitably </li></ul>
  3. 3. The Goal of DDSC Increase Market Share Profitably Retailer Vendor What are the key ingredients?
  4. 4. The 1 st Case Study – Apparel <ul><li>A manufacturer of women’s dresses receives spreadsheet/distribution orders from the buyer </li></ul><ul><li>Analyzes the breakdown and calls back the buyer to change the distribution </li></ul><ul><li>Buyer approves based on past performance </li></ul>
  5. 5. Step 1 - The Foundation Supply Chain Visibility Vendor Merchandise Management Retailer Vendor Increase Market Share Profitably Time/Degree of Trust and Complexity Benefits
  6. 6. Case Study #2 – Health & Beauty <ul><li>A brand name cosmetic company is having difficulty meeting their fill rates </li></ul><ul><li>Their customer offers a special VMI program </li></ul><ul><li>Vendor re-engineers order management processes based on the VMI program </li></ul><ul><li>Vendor improves fill rates resulting in increased sales </li></ul>
  7. 7. Case Study #3 – Apparel <ul><li>Manufacturer in children’s wear </li></ul><ul><li>Receives PO from buyer with a three month lead time </li></ul><ul><li>Shipment arrives but buyer calls to cancel PO </li></ul><ul><li>Vendor analyzes PoS data from past performance </li></ul><ul><li>Vendor offers buyer the goods under “Guaranteed Sale” terms and defines the distribution that will meet sell through rates </li></ul><ul><li>Vendor sells more under Guaranteed Sale but at higher margins </li></ul>
  8. 8. Step 2 - Awareness Supply Chain Visibility Vendor Merchandise Management Retailer Compliance Retailer Supply Chain Programs Time/Degree of Trust and Complexity Benefits Retailer Vendor Increase Market Share Profitably
  9. 9. Case Study #4 – Food / CPG <ul><li>An agent for an Italian pasta brand wanted to maximize their profitability </li></ul><ul><li>Held very high in-stock position but had to absorb mark downs to meet sell through rates </li></ul><ul><li>Used PoS to identify stores with the heaviest mark downs </li></ul><ul><li>Optimal reduction in inventory to maximize profitability while being compliant </li></ul>
  10. 10. Step 3 – Focus on YOUR Priorities Supply Chain Visibility Vendor Merchandise Management Retailer Compliance Retailer Supply Chain Programs Reconcile Conflicting Supply Chain Goals Time/Degree of Trust and Complexity Benefits Retailer Vendor Increase Market Share Profitably
  11. 11. Case Study #5 – Seasonal Goods <ul><li>Vendor of Christmas accessories had a sold-out season </li></ul><ul><li>Buyer gladly allocates the same budget for next year but vendor recommends to double it </li></ul><ul><li>Buyer refuses because of budget constraints </li></ul><ul><li>Vendor leverages consignment program </li></ul><ul><li>Sales double and order-to-cash was reduced </li></ul>
  12. 12. Case Study #6 - Apparel <ul><li>Manufacturer of women’s wear measured their cash-to-cash cycle when importing product </li></ul><ul><li>Moved manufacturing domestically </li></ul><ul><li>Only interested in consignment and/or guaranteed sale programs </li></ul><ul><li>Resulted in higher margins, less inventory, and reduced cash-to-cash cycle </li></ul>
  13. 13. Step 4 – Optimize Performance Supply Chain Visibility Vendor Merchandise Management Retailer Compliance Retailer Supply Chain Programs Reconcile Conflicting Supply Chain Goals Asset Management Time/Degree of Trust and Complexity Benefits Retailer Vendor Increase Market Share Profitably
  14. 14. Conclusion <ul><li>These key ingredients are critical in executing an effective DDSC in order to gain a competitive advantage and become a superior performing vendor </li></ul>
  15. 15. Q & A

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