Email
sinha.rk.dr@gmail.com
Choice of demand signal can make or break our Supply Chain improvement efforts.
Supply Chain teams often struggle to demonstrate business benefits from their improvement efforts. While they analyse several possible causes for the slip, an important one often gets missed out. It is the choice of demand signal. What do we consider as demand? Let me explain it in a General Trade environment.
In a typical CPG organisation, there are at least five options for the demand signal. The most primitive and the most commonly used is sales by the company. It is the primary sales to distributors.
Some companies have now moved to a better measure, which is actual orders received from distributors. If we want to go a step closer to consumers, it would be secondary sales by distributors. Even better is retailer orders received by distributors. The best, of course, is actual purchase by consumers, suitably adjusted for stockouts on retail shelves.
A general principle to keep in mind is to track demand as close to consumers as practical, where data is available timely, comprehensively and reliably. Getting closer to consumers minimises the distortions caused by stockouts, push sales and the famous bullwhip effect.
Would love to hear from you how you track demand in your organisation…