Can Demand Drive Production?

Dashboards may unite analysis and planning

Switching from a supply-driven to a demand-driven business can be tricky for manufacturers, but a new report from Forrester Research concludes that demand dashboards are the quickest way to begin the change.

According to the report's author, senior analyst Mark Dixon Bünger, becoming "demand-driven" will help original equipment manufacturers (OEMs) better control inventory, unlike supply-driven policies that leave OEMs at the mercy of their inventory.

Organizations must overcome several obstacles to become demand-driven. One is the effort to combine demand-sensing experiments that are taking place throughout the organization. "Sensing, interpreting, and acting on demand signals don't fit neatly into any preexisting departments or roles," according to the report. "With no formal organization to unite them, dozens of individuals at each OEM analyze demand data or seek information — unaware of one another's activities." The report concludes that a demand dashboard is a "low-risk, short-term solution" to this problem. Creating a simple dashboard on a page on the company intranet can be the first step in uniting all forecasts. According to Bünger, "The scattered people doing these [demand-driven] initiatives are the ones who should now band together to get the dashboard rolling."

Another problem is the state of current demand technologies from companies such as i2 Technologies, Manugistics, and Trilogy, which are "limited" according to companies interviewed for the report. However, on a more positive note, Bunger believes that the technologies from these companies as well as BI vendors such as Cognos and SAS will catch up to the needs of automotive corporations, the vertical studied for this report.

Bünger also believes these findings translate to any industry. In fact, using demand-driven analysis may be easier for other industries. According to the report, companies such as Home Depot Inc. and Saks Fifth Avenue are trying price and markdown optimization, both of which are demand-management functions. "Automotive is unique in that it's a high-value, infrequent consumer purchase — a 'worst-case scenario' in terms of difficulty. As automakers figure out how to analyze and understand their customers' behavior, other industries that have slightly easier demand-analysis problems will learn from the automakers," Bünger says.

— Jeanette Perez

Jeanette Perez, former assistant editor of Intelligent Enterprise, has a master's degree from Columbia University. She is now a freelance writer based in New York City.

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