In today's consumer industries, 50% of companies surveyed have indicated that it takes more than a month to sense changes in demand. This has resulted in an excess of downstream supply chain inventory closest to consumers. On the other hand, manufacturers and their suppliers focus on lean principles to trim the fat and reduce work in process and raw material inventories. These approaches have resulted in an inability of companies to respond to market events like rapid changes in customer affinity, unforeseen contamination, extreme weather events, etc. This research brief outlines future Aberdeen research that will focus on technology strategies used to effectively manage these market events through the supply chain.
Aberdeen research has found that 50% of consumer industry companies report that it takes more than one month to sense changes in demand. This is unacceptable in today's dynamic business environment. Demand fluctuations can happen due to several market events. We can think of market events as unforeseen incidents like weather that cannot be controlled versus artificial events like promotions that stimulate demand. The focus of this research is on unforeseen events that cannot be controlled but can be effectively managed if the right processes and technologies are in place. The three critical assets that companies can leverage to react to market events are:
1. Inventory: For example: adjusting inventory targets based on demand and order lead times fluctuation; ability to track inventory from the consumer to source in the event of contamination and recall
2. Supply chain network: For example: having a flexible Supply chain network to be able to source from internal and external sources; having the right mix of common carrier and dedicated fleet, etc.
3. Products: For example: Ability to introduce new products and phase out old products based on changes in customer brand affiliations.
In addition, this study will delve into whether companies focus on lean philosophies versus being agile to manage the market events. There are significant opportunities for companies to gain improvements in top line sales, profit margin, and inventory levels through improved market responsive practices. The following are the areas where companies are facing challenges with respect to their inability to sense and respond to market events.
To improve responsiveness to market events, Best in Class companies focus on holistic approaches by leveraging their key assets like inventory, product and supply chain networks. They do not focus on piece-meal approaches but are able to:
1. Adjust inventory policies rapidly in response to demand spikes, contamination issues, etc.
2. Swiftly shift to alternate supply chain networks when faced with regional disasters, logistics costs increases, etc.
3. Rapidly implement product changes and introduce new products when faced with customer affinity changes.
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