Supply Chain Dynamics – Demand Management
In crises managers are pressured to improve the financial position of the company at the same time that demand levels are dropping dramatically. This typically leads to strategic decisions such as reducing inventories (to reduce the level of working capital), downsizing (to reduce operational expenses), and closing manufacturing facilities (to reduce fixed assets). These decisions, however, have substantial operational consequences when demand increases at a later stage: the reduction of inventory levels, workforce, and manufacturing facilities are decisions that require significant time to be reversed. If the situation that triggered such decisions is temporary and demand recovers faster than the speed at which firms can react, lost sales and general problems with inventory management will appear.
Knowledge about the underlying dynamics behind the demand slump is therefore needed to avoid costly mistakes. With regard to supply chain dynamics, observations are generally made that (a) production variance tends to be greater than demand variance, and (b) that this difference increases the further upstream a firm is. This has the effect of greatly amplifying demand fluctuations through a supply chain and has been termed ‘the bullwhip effect’.
Tactically, for managers it is much more important to keep track of consumer demands, supported by an endogenous simulation or demand driven methodologies of ordering behaviors, rather than relying exclusively on information obtained from one or two echelons downstream. These simulation-based results can drive decisions on plant openings and closures, staffing decisions, and aggregate inventory strategies.
Azhar Qadri
Supply Chain Expert | Operational Intelligence | Smart Manufacturing & Excellence | Supply Chain Optimization | Consultant and Trainer
MBA, BE, PE, CSSC, CPIA, CSCP CDDP, CSCM, CSCA
Trainer and Consultant - SMEDA
Executive Member - SCAP
A successful career in supply chain necessitates a never-ending thirst for knowledge and the most up-to-date supply chain skills and knowledge. Even though continuing education and certification programs can take time and money, they help get your specialized knowledge or skills recognized.
https://www.vcare.international/certifications
When professionals have training that other professionals lack, it distinguishes them and sets them apart from the crowd. Certification and master classes show that the professionals are committed to learning, excelling, and using best practices.
https://www.vcare.international/mmc
Featured Certification Programs
Certified Stores and Stock Controller (CSSC)
Certified Production and Inventory Analyst (CPIA)
Featured Mini-Master Classes
Supply Chain Framework and Strategy
Collaboration among Sustainability, Procurement and Supply Chain
Implementing 3PL and 4PL Strategies in the Value Chain
Supply Chain Sustainability with Circularity to Drive Profitability
