Although supply chains around the world have experienced major disruptions over the past year and a half, consumer expectations have only become more exacting. Customers and vendors want to know precisely when their goods will arrive and where they are in the delivery process at all times. But as manufacturers and distributors race to track and fill orders in an unstable environment, many are struggling to keep pace with demand.
For companies looking to resolve these challenges, demand chain management (DCM) will be one of the most important priorities in 2022. DCM refers to the integration of disparate elements of the supply chain and the creation of a synchronized process among manufacturers, distributors and retailers. By increasing communication and coordination at every link of the supply chain, companies are able to operate more transparently and efficiently while giving customers better rates and increased visibility.
Manufacturers and distributors can no longer afford to view the supply chain as a strictly internal function that stands apart from customers. Instead, they need to focus on interconnected, data-driven demand chains, which can streamline processes while improving the customer experience.
Keeping Up With Consumer Demand
Buying behavior changed radically during the pandemic, with increasingly more customers favoring online shopping over in-person purchases. Two years after the initial lockdowns, it seems the change may be permanent. McKinsey found that the use of online channels to purchase goods will increase by between 20% and 40% between the pre-COVID and post-COVID periods. This is part of a broader trend toward speed, convenience and visibility that supply chains must adapt to.
Yet as consumer demand intensifies, supply chains still contend with production delays, a lack of raw materials, shipping bottlenecks and a wide range of other issues. EY Global found that the COVID-19 pandemic had a negative impact on 72% of supply chains. According to McKinsey, 93% of executives in the industry say they intend to make their supply chains more flexible, agile and resilient to mitigate these risks in the future.
These solutions aim to get goods into consumers’ hands more quickly and affordably than ever before. When consumers don’t have access to real-time updates on the status of their orders — or when those orders fail to arrive on time — they’re likely to switch to other retailers.
While manufacturers have to be capable of changing production schedules quickly in response to shifting market conditions and consumer demands, distributors need to create an omnichannel platform that provides ample information and assistance at every point in the customer journey. Meanwhile, digital marketing should inform consumers about manufacturer promotions and help to forge relationships with new buyers. All parts of the demand chain ecosystem should work in concert to improve customer service and increase efficiency.
Digitized Demand Chains Provide Greater Flexibility
The most effective demand chains are automated, agile and fully integrated, thanks to digitization. Data analytics and digital collaboration platforms can help supply chain leaders improve the accuracy of their forecasts, identify and address problems more rapidly, and provide customers with a more cohesive experience across the board. According to a 2021 report by Fictiv, 91% of manufacturers say they’ve increased their investments in digital transformation over the past year, a reminder that the pandemic has accelerated the adoption of long-overdue changes in the sector.
One of the primary benefits of the demand chain is adaptability. COVID-19 has demonstrated how quickly swings in demand and shifts in delivery schedules can occur. Demand chains need to be capable of adjusting to these changes and providing continuity of service. Digital forecasting tools can help supply chains predict and prepare for these changes, while rebate management solutions give supply chain partners mechanisms for managing their relationships as circumstances on the ground shift. When supply chains have this digital infrastructure in place, they’re able to provide more flexible order fulfillment, centralize the management of data and processes, and optimize the customer experience.
When each segment of the supply chain makes decisions based on accurate and transparent information, resilience, agility and drastically improved customer service will follow. Instead of relying on spreadsheets and manual processes that can create and exacerbate delays, demand chains should be built around digitized operations that are predictive, synchronized and capable of adjusting to new developments as they arise.
The Future of Demand Chain Integration
Demand chains are designed to be customer-centric. Product ecosystems have never been as interconnected as they are today, which is why there needs to be coordination among every element of the supply chain to ensure that products are being delivered as quickly and efficiently as possible. Despite the fact that 98% of manufacturers say improving customer satisfaction is a key focus over the next year, 53% acknowledge that they have had to delay some orders to prioritize high-value customers.
Supply chain leaders shouldn’t be forced to make this sort of compromise, which can damage customer trust and lose business. This is why companies are adopting demand chain strategies that will mitigate the risk of disruptions and secure stronger relationships with customers.
Many demand chains are scrutinizing their networks and determining how they can move operations closer to end customers. McKinsey reports that 90% of supply chains expect to pursue some degree of regionalization over the next three years, a move that will hedge against future shocks by removing unnecessary steps in the delivery process. Companies should also incorporate their location into demand forecasts, asking themselves: How do different states, regions and customer segments affect these forecasts?
As companies continue to navigate the shocks caused by the pandemic and its economic fallout, they’re increasingly recognizing that an integrated, data-driven demand chain is essential to flexibility and customer satisfaction. Over 2022 and in the years to come, demand chain development will be a key differentiator as companies navigate an ever-changing landscape.
Andrew Butt is co-founder and CEO of Enable.
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