Demand-Driven Supply Chain Series – Part 5 Conclusion and Path Forward

Hello, this is Jim Tompkins, President and CEO of Tompkins International. I first want to thank Greg Brady for being with us on our last podcast, where he really did a great job of explaining the technology of demand-driven supply chain.

Now, to conclude this podcast series on demand-driven supply chain and to provide you with some thoughts for your own path forward, I am joined by Gene Tyndall.

We will help you understand what we have learned thus far, how to transition this material into the future, and do some Q/A around the typical questions we receive as we discuss this topic.

To summarize, you heard me in part one define demand-driven supply chain, and discuss why a transformation to this is the right strategy for every company in 2012 and beyond.

As the global economy recovers from the deep recession, customers have learned to be smarter about what they buy; and they have more options for shopping and ordering than ever before. I also provided further reasons why every company should re-orient itself towards being customer-centric – for increased Value Creation from significant cost and inventory reductions; from dramatic improvements in lead times from “order to cash”; and, from proven gains in revenues and margins.

Gene

Yes, Jim. And, in part two, I discussed 10 steps in planning for demand-driven supply chains, which provided our listeners a step-by-step methodology to get ready for becoming a DDSC company. We both pointed out that, while the term “demand-driven” has been used for several years, the incentives to truly transform to that state were not so compelling, much less the clarity of capabilities and approaches. So, we have been referring to the progression today as the “New DDSC”, to indicate the new and improved business case and methods.

In part three, Brenda Enney discussed the Organizational and Change Management implications of transforming to DDSC. Based on our engagements with both producers and retailers to re-organize their supply chain missions, priorities, functions, and performance, she conveyed ideas and tips for thinking demand-driven and aligning that with business and operations strategies that better reflect market realities. Brenda contrasted business processes from functions, and advocated new organizational models that facilitate more end-to-end collaboration, that responds to customer demand. She also discussed how change management has a major role in the conversion to DDSC, since we now must work across functions and not in the traditional silos.

Jim

Yes Gene, for sure. And, I was pleased to hear our DDSC technology partner, through the leadership of Greg Brady, talk about how we can now fully implement a demand-driven supply chain solution. The new strategies, new processes and organizations, and new performance targets can now all be enabled by the industry-leading technology like One Network. Greg discussed how the technology integrates all the supply chain trading partners onto one platform, bases product flow on near real-time sales data, and optimizes the end-to-end supply chain as a Unit. So, true demand-driven supply chains are really a reality today.

Gene

Yes Jim and also, we note that Greg emphasized the goal of demand-driven again, which is “To provide the highest possible service levels, at the lowest possible costs and that with the proper processes, organization, and technologies we can close to the theoretical minimums of 99% in-store stocks and 20-25 days of supply.” Which really drives hundreds of millions of dollars of revenue and operating margins to companies that fully implement the demand-driven supply chain solution. So Jim, let’s share a few Q/As.

First, what do you hear the most from discussing the new demand-driven supply chains with supply chain executives?

Jim

Almost all reply, “Wow, this sounds too good to be true; does it really work”?

This question is prevalent, because we are not yet accustomed to having near real-time, and perfect, information on what is selling and moving throughout the supply chain. We have had to deal with the inaccuracies of sales forecasts, and the time lags between ordering and delivering – not to mention the problems of inventory levels and mis-deployments, to protect us from volatility and risks. Yes, it does work now, and it has been proven.

Here is one for you, Gene: What barriers do you see that restrain companies from moving into DDSCs?

Gene

Well, some companies believe they are already demand-driven.

But, often what they are is really customer-focused, not customer-centric. They may try to think about their customers, but they more often act as product suppliers.

Secondly, they are already analyzing POS data, usually yesterday’s or last week’s, so they believe their demand planners are well aware of what was sold. But, of course, all too often this “yesterday’s data” is not finding its way into “today or tomorrow’s” supply chain actions; nor, is it communicated in a timely way to the supplier’s suppliers.

And, third, some companies are concerned about new software as they have implemented full ERP solutions, or new processes as they have done some process re-design for the ERP.

Our message to this perceived barrier, just as Greg Brady talked about, is that the OneNetwork software works “on top” of the ERP, operates in a cloud platform, and is pilot tested first. Further, the process work is more about streamlining than it is total re-design.

Jim, let’s now address the question of the best path forward. How would you start this advice?

Jim

Well Gene, as you stated, we believe the pilot test is the right way to get started. The inherent skepticism is addressed here, as well as the ability to compare the current supply chain performance against what the new demand-driven supply chain can deliver. By selecting a product category, and a particular supply chain for it – from retail point of sale information back through to the supplier’s suppliers – we can test the technology and streamlined processes and see clearly the benefits of the new demand-driven supply chain.

What would you add?

Gene

Right on. I would add that this pilot test can be completed in a few months, four months to cite the average. The first month we streamline the business processes to deal with the technology enablers; the 2nd and 3rd month we test the solution running in a simulated production environment; and the 4th month we evaluate the results and plan the next steps.

Once the pilot test is completed, we will know the time and resources required for extending to other product categories and other supply chains of the company. The ROI at that point is clear and compelling.

So thanks Jim, these few Q/As will be very helpful, and there are many more that we are happy to answer as time progresses and as we go along. I will turn it back to you to conclude. Thank you.

Jim

Yes, the path forward is not complicated. The pilot test approach is more about selection and trading partner cooperation than it is technical issues. It is also about process streamlining, mind set adjustments, the cultural adaptation, and all of which we are experts at.

Hopefully, the listeners have received valuable information and take-aways from this important podcast. Transforming to demand-driven supply chains is the most important initiative that supply chain leaders can plan and activate in these times of demand volatility, customer buying behaviors, and requirements for higher service levels and lower costs to serve. We stand ready to help get you there, and we hope you give us the chance.

Thanks to Gene, Brenda, and Greg, for their valuable knowledge and insights into demand-driven supply chain transformations. We look forward to speaking to you again real soon when we kick of another podcast series in April.