Response management is all about dealing with variability in the supply chain, according to Mark David, supply chain solution principal with SAP AG. It incorporates traditional concerns about innovation and adaptability to changing dynamics in the marketplace. And it addresses critical issues such as globalization, outsourcing and intensified customer demands. Companies today are attempting to do more with less - especially less inventory - but are also determined to be flexible enough to react to unexpected changes in buying patterns.

In the past, says David, processes applied to response management have generally been supply-centric. Companies have scrutinized their finished goods inventory, subassembly operations and manufacturing. But a complete program must look beyond those areas to inventory throughout the network. Suppliers need to be able to take an order and re-prioritize it using existing pools of inventory, wherever it lies.

Response management today has become an integral part of risk management, which involves some new "soft" metrics such as the impact of supply-chain problems on customer service. By reallocating inventory on the fly, David says, supply-chain managers can actually help to boost revenues. First, though, a lot of traditionally manual work has to become automated.

David has heard of companies achieving revenue growth of between 1 and 2 percent through the application of better response management. He cites the case of a consumer electronics company that suddenly experienced a surge in demand by a big retailer. It was able to work with its supply-chain partners to respond quickly to the development.

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