Demand chain planning one of the tools that helps formulate an effective distribution strategy for your company. The primary objectives of the distribution strategy are to ensure that distribution channels are well organized, that the margins and payments to all partners in the supply chain are reasonable and proportionate to the value delivered, and that there are no issues that threaten to disrupt the distribution of the company’s offerings. Demand chain planning is a tool that helps forecast demand and plan your supply chain based on marketing research, customer requirements analysis and feedback.
Demand chain planning involves reviewing details of the supply chain with customers and then working backwards to ensure that customers’ demands are adequately met. A key necessity for this review is a thorough understanding of the demand for the product; thus, information contained in the market attractiveness report is very helpful when using this tool. Demand chain planning plays a vital role in the company because it impacts all production and sales activities. If adequate planning is not conducted, then situations can arise whereby a company is either producing more product than what is in demand—resulting in surplus inventory—or producing less than the demand—resulting in potential loss of sales. In service industries, similar circumstances may result in the hiring of excess staff relative to demand, or a short staff situation when demand surges.
Because the demand chain involves external parties, such as raw material suppliers, it highlights where the greatest value is created and enables a company to decide if it wants to integrate backwards and assume the functions of some of its suppliers. In situations where the customer of a company is not the end customer, then the company may also consider integrating forward and assuming the functions of its current customer, thus distributing directly to the end customer.
Through proper demand chain planning, it is usually easy to identify gaps in fulfilling demand because checks and balances are placed at multiple stages throughout the chain. Many leading companies in different industries use online tracking of all their relationships with different entities in the demand chain to ensure that instant communication takes place and issues are addressed as soon as they are discovered.
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