Demand-Driven Logistics: Money-Saving Strategies for Moving Things Right

Demand-Driven Logistics: Money-Saving Strategies for Moving Things Right

While demand driven planning within the supply chain (DDSC) isn’t for every business, it can do wonders for the companies it is right for. DDSC refers to planning strategy, goals and outlining specific tasks and targets with established deadlines in order to make the supply chain more demand-driven through closer collaboration. Companies which are optimized for reduced costs and improved production, i.e. those with transparent, agile infrastructure and well-organised coordination between staff, stand best to succeed with demand-driven supply chains. Moving to demand-driven logistics (DDL) in your company means documenting and assessing your current process and demand history, applying an inventory classification and planning well in advance for inventory introduction. Adopting DDL can increase visibility, efficiency, in order fill rates and revenue as well as reducing inventory. Here is an explanation of how demand-driven logistics can help your business be more competitive.

Better Coordination in the Supply Chain

Coordination with different components of the supply chain is difficult. Applying DDL can result in closer engagement between shippers, customers, suppliers and third-party intermediaries to drive down costs and reduce inefficiency within the supply chain. Aligning metrics between suppliers, manufacturers and retailers can be challenging as each evaluates their processes differently. Supply chain managers have to work with the members of the chain to interpret signals with the same understanding, in order to, for example, effectively coordinate with suppliers and shippers to arrange smaller quantities on a frequent basis in order to minimize inventory. There are many uncontrollable (and typically unpredictable) challenges which shippers face, including fluctuating fuel costs, erratic consumer behavior and other supply chain disruptions. Planning ahead to have protocols in place which manage this demand responsiveness can be a competitive differentiator. Closer communication and metric alignment increase the scope of visibility to inbound flows, which is essential in meeting demand signals and ensuring predictable price changes.

Collaborating with Third Parties

DDL involves taking customer’s needs upstream to one’s suppliers in order to better manage transportation and control cost. Third-party logistics (3PL), i.e. the hiring of external organizations to perform logistical activities typically done within the client’s organization itself, can be especially helpful as objective experts here. Sequencing high volume shipments, managing offshore manufacturing and inventory levels can be done more efficiently with greater integration. When considering 3PL options it is always wise to consider whether you are after generic off-the-shelf options or custom tailored manufacturing solutions like Essentra Pipe Protection Technologies, for example.

Benefits for Transport

Apart from distribution and warehousing (which have benefited from developments such as e-commerce), transport is the greatest beneficiary of DDL. While great companies manage outbound transport and distribution with a great degree of success and care, many err by not taking a holistic approach and considering inbound processes. Transports costs can creep, which means that shippers should have the best available forecasts to be able to flexibly design transportation options (e.g. combining different land and air vehicles) for their different needs. It is especially important for shippers sourcing globally as more variables can disrupt international procurement. DDL organizes a common platform for shippers to share and manage information, using transportation management systems (TMS) and supply chain visibility tools. Sharing information in the same network helps facilitate upstream planning, engaging all elements of inbound information rather than just certain parts of inbound materials procurement. DDL is very valuable for shippers using a lot of air freight, such as those used to transport mobile phones because they can segment the parts by mode and need and reassemble the final product at the fulfillment location close to the point of consumption. Controlling prices at each step and attaining greater awareness of possibly vulnerable links is key in the face of market uncertainties. DDL companies can measure performance, identify problems and execute truly holistic solutions.

Predictive Flexibility

With greater downstream and upstream visibility comes the opportunity to align plans around common goals, from the local to regional and global levels. At the local level, greater alerts and guides to transport helps keep costs in check (which is essential for bottom-line oriented businesses) and regulate the flow of raw materials. Constant updates on carrier rates, commodity moving costs, and aggregated information keeps inbound flows and transportation costs down.

Demand-driven planning within the supply chain enables closer coordination within the Supply Chain, tighter collaboration with third parties, more efficient transport use and predictive flexibility. If you are struggling to manage consumer demands in a competitive way, consider demand-driven logistics strategies.

By Matt Dunn – Senior Vice President, Commercial- Distribution at Essentra Americas