A company that is not demand responsive can easily deceive itself about how well it's servicing customer needs. "All of a sudden you start seeing a bunch of near-misses," Sharma says. "At the end of the quarter [there's] a corrosion of goodwill. When you go for the next order, suddenly it might not be there."

A second symptom of poor responsiveness is the rising cost of meeting customer needs. Sudden, sharp shifts in demand can lead to costly measures such as expedited shipments. "You've taken a margin hit," says Sharma. "But has your customer really perceived that you've delivered the value?"

The customer shares responsibility for building demand-responsiveness into the supply chain. It must provide the supplier with accurate consumption data. Distributors' demand signals aren't timely enough in about 80 percent of cases, Sharma says. Instead of fixating over planning and forecasting, supplier and customer need to work together to meet the market needs of the moment. "There are things you will not get from just looking at numbers."

Communications technology has reached a level of maturity that allows for close collaboration among supply-chain partners through multiple tiers. Still, says Sharma, "people are realizing that you can't forecast to the 99^th degree of accuracy. That's why responsiveness has become so important."

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Keywords: Forecasting & Demand Planning, Technology, Business Intelligence & Analytics, Business Process Management, Collaboration & Integration, EDI Communication (XML/EDI), Event Management, Product Lifecycle Management, Sales & Operations Planning, Supplier Relationship Management, SC Finance & Revenue Mgmt., SC Planning & Optimization, Supply Chain Visibility, Global Supply Chain Management, Supply Chain Analytics & Consulting, Business Strategy Alignment, Customer Service, Customer Needs, Service-Level Agreements