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1、Demand & Supply Chain Management: a Logistical ChallengeAd. R. Van GoorAd.R. van Goor is professor of logistics and supply chain management at Amsterdam Free University, Faculty of Economics and Business Administration and at Nyenrode University, Breukelen, the Netherlands, center for Supply Chain M
2、anagement. He can be reached by e-mail at: IntroductionConsumers and industrial customers are demanding more and different products and services. The industry requires replenishment of small batches in high frequencies. The consumer asks for a broad assortment with fresh products, tenable qualities
3、and short lead-times or direct deliverable. These developments in Business-to-Consumer (B2C) markets and Business-to-Business (B2B) markets can be illustrated by a number of different examples.In recent years individual suppliers were successful to meet the requirements of their customers in an effi
4、cient and effective way. Depending on the innovative power there are differences between types of industry and their ability to satisfy their customers. In the meantime for most companies the individual flexibility and agility has reached a saturation level: high efforts and high costs have to be sp
5、ent to satisfy customers demands.The rise of Demand - or Demand driven - and Supply Chain Management (DSCM) can be explained by the understanding that only combinations of companies are able to meet customer requirements in a more efficient and better way than individual companies can realize. Colla
6、boration between suppliers, manufacturers and retailers can improve the number of satisfied customers by reducing lead-times, improving service levels and decreasing costs.Customers and competitors force companies to co-operate with each other in one or more chains or networks. For some companies th
7、is way of co-operation is the last post to continue their existence. Other companies believe that DSCM is an enormous opportunity to redefine their missions and to introduce innovative types of constellations to meet customers demands on a high level in chaining market conditions.This paper is disti
8、nguished in the next paragraphs:Introduction;1. Partnership in Supply Chain;2. Demand and Supply;3. Four Stages in SC Logistics;4. Research in FMCG;5. Pitfalls in Partnerships;6. Trends.The need to collaborate can be illustrated by a statement of the Food Management Institute: To be a prime particip
9、ant in the consumer replenishment process, requires a range of capabilities bigger than a single enterprise. They expect the rise of a number of chains or networks in which an individual company only accounts for best of class, that means the contribution of activities in which the company is excell
10、ent. Although the design of a chain is the first strategic step, the implementation, planning and control and functioning of the chain are equal important steps. Or in terms of FMI: The dysfunctional supply chains of today cannot serve the consumer of 2005. They distinguish a number of different cha
11、ins, but are not satisfied about their operations. We conclude that both the design and the operations of a supply chain are closely related to be successful in the implementation of DSCM-concepts.Positioning this paper, a broad logistics view on DSCM will be our focus. To illustrate this, top manag
12、ers in recent surveys forecast the following trends in logistics and distribution:The scope of supply chain management will shift from national via European to global;Multimedia trends (the Internet, information technology, mobile communication) will bring about a revolutionary change in supply chai
13、n management;The negative effects of JIT deliveries (on the environment and on costs) will compel companies to develop new logistics concepts;A re-allocation of tasks will occur within the supply chain;Management bodies of national sales organizations will see their power and influence decrease;Logi
14、stics restructuring projects will fail less often, but they will still require a great deal of time and yield lower savings than expected;Last but not least, customers will become increasingly critical and supply chain management will become increasingly important in the battlefield of competition.P
15、reliminary we conclude that Supply Chain Management is a trend and a solution for a number of the mentioned developments.1.Partnership in Supply ChainsHandfield and Nichols (1999)(04) argue that integrated supply chain management is becoming recognized as a core competitive strategy. As organization
16、s continuously seek to provide their products and services to customers faster, cheaper and better than the competition, managers have come to realize that they cannot do it alone; rather, they must work on a cooperative basis with the best organizations in their supply chains in order to succeed. T
17、he success of SCM will depend upon the choice of the specific partners in the supply chain and on the way in which they co-operate efficient and effective with each other.It cannot be denied that different functional areas try to satisfy customer demands as good as possible. Especially the marketing
18、-function build a respectable reputation from this point of view. This customer orientated view is also underwritten from the customer service theory within the logistics function.Unless this hopeful sign, we conclude that customer orientation is insufficient in a number of industry-types. Even with
19、in companies there exists a continuous battle between functional areas about customer responsibility: agreements with customers are frequently transferred from one function to another. In this respect we need to clarify the differences between Business Sciences (Bedrijfskunde) and Supply Chain Manag
20、ement.In Business Sciences, the target is to integrate the different functional areas within one organization. The tuning of the policy of a Research & Development department on the policy of a marketing department has to be positioned as an example of a problem in Business Sciences. Another example
21、 regards the design of a financial administration that is equipped for the reporting on key performance indicators for the logistics function. About these types of functional integration within companies, a lot had been published and different studies like MBA exists.Handfield and Nichols (1999, p.
22、153)(04) conclude on Business Sciences that “functional capabilities (R&D, manufacturing, marketing, technology) are enablers for success, but are no longer sources of competitive advantages, because they can all be replicated in time. SCM provides a means to achieve a definitive competitive advanta
23、ge.”Supply Chain Management broadens the scope: The integration of decisions within and between companies in a chain is the main mission. Information flows, financial flows and good flows have to be integrated from a multi-company point of view. This means that SCM regards the activities of function
24、al management and of general management in each company. In other words: a manager can and may no longer restrict himself to the control of his own department or his own company. Functional and general managers have to be involved in the control of network relations in the direction of customers and
25、 suppliers. Depending on their starting point (market, logistics, purchasing or ICT) in literature a number of different definitions on SCM have been formulated (Gattorna, 1998)(03).With the help of figure 1 we try to statue the differences between Business Sciences and SCM. In that figure we talk a
26、bout the generic customer-supplier relation. That can be situated as a relation between a packing supplier and an international label manufacturer. But also a relation between a logistics service provider and a retailer. In our formal definition on SCM we will argue that a supply chain is only defin
27、ed when two interfaces are existent; for these interfaces at least three parties are necessary. As the basic principles of SCM can be illustrated by two parties, we restrict ourselves to that number, picturing figure 1.SCM versus Business SciencesFrom figure 1 we conclude that SCM regards the interf
28、ace and the allocation of decisions between two or more companies. This can be illustrated by different types of definitions of SCM (Hoekstra, Romme, 1993)(05)2. Demand & SupplyAccording to our opinion the term Supply has a strong association with the idea that SCM regards the management of the rela
29、tions with suppliers. From a customer point of view we propose to start with demand management. For almost every chain that means that chain conversion should be the leading theme.In figure 2 we picture a classical supply chain: a strongly push-driven chain, mostly based on production dominance. Rel
30、ated to a pure marketing vision the demand chain in figure 3 may be more realistic.Figure 2 - a Supply ChainFigure 3 - a Demand ChainThis complete pull-driven chain can be too extreme. Based on this meaning, a combination will be the best representation of reality.Figure 4 - a Demand and Supply Netw
31、orkIn figure 4 we present the Demand and Supply Network. We emphasis that this figure can be widened with logistics and ICT-service providers. Based on this idea the Center for Supply Chain Management of Nyenrode University has formulated the most embracing definition: “Demand and Supply Chain Manag
32、ement (DSCM) is the management of a network that links customers and suppliers as one single entity with the objectives to create value and reduce waste through the voluntary integration and co-ordination of the objectives of three or more - and ideally, all the - independent parties in the network.
33、”We shall give a short explanation of a number of elements in this definition.In terms of Hoekstra, Romme (1993)(05) a chain is a logistical infrastructure with three nodes and two interfaces. Gladly most of the companies have more than one customer and usually also more than one supplier. Based on
34、this statement a network-infrastructure will be more realistic than a chain structure. Regardless this vision, the term network-integration has a relative long history in the information technology with slightly different meanings compared with logistics. For this reason we persist to use the term c
35、hain integration, implicitly supposing that network integration is a better one.The management of a supply chain as a single entity agrees with the definition of Jones & Riley (1985)(06). Especially in the basic figure of Efficient Consumer Response, Kurt Salmon Associates (1993)(08) emphasize that
36、it regards the destruction of the walls between the different trading partners. The decoupling of the different functions and partners by means of inventories has to be avoided. Besides our discussion on the differences between Business Sciences and SCM, ECR has given us an idea what we mean by mana
37、ging the chain as a single entity.The creation of Consumer Value is a central theme since Porter (1985)(11) introduced the term Value Chain. The creation of value has to be balanced with the efforts a company has to perform. Waste can be interpreted as the decrease in the spend thrift of raw materia
38、ls, etc. but also in a broad sense as the reduction of costs in relation to revenues. By this we mean that a supply chain has to be efficient.Supply chain corporation does not include mergers and acquisitions. Co-operation in the chain is voluntary, but can never without commitment. The voluntary co
39、-operation knows a variance of possibilities: from huge legal constructions to gentlemen agreements.Companies can participate in more than one chain. The consort of companies can be defined as a possible path through a detailed network.We propose to concentrate Demand driven Supply Chain Management
40、on the integration of four functional areas within and between companies. From the demand side it regards the marketing aspects of DSCM, while purchasing is the entrance from the supply side. Logistics and ICT are the essential facilitating functions for DSCM. The four mentioned areas are according
41、to our opinion the leading elements for the design, planning and implementation of a Demand and Supply chain (Ploos van Amstel, van Goor, 2002)(12). Figure 5 is the representation of that vision. Research in the field of DSCM has to concentrate on the interfaces between the different points of view.
42、 For illustration purposes we restrict ourselves to some possible interfaces. Category management is an important integration concept between marketing and purchasing.e-Commerce as part of e-Business is a typical example of the rising interface between marketing and ICTEfficient Replenishment Upstre
43、am (ERU) is a co-operation between purchasing and logistics on a more intensive base than is the case until now.The application of Advanced Planning Systems (APS) is a fundamental subject for the integration between logistics and ICT from a real supply chain software vision.Figure 5 - DSCM viewpoint
44、s and interfacesWith these examples we finish our discussion on the different elements in the broad definition of Demand and Supply Chain Management.3.Four stages in SC LogisticsCustomer service is a process that transcends organisational boundaries, even those of the company itself. The customer di
45、stribution process is more likely to involve third-party logistics providers that perform certain activities in the supply chain: transport, storage, reconditioning, testing and even assembly. That is why companies in the supply chain strive to achieve strong co-operation in the supply chain, supply
46、 chain integration or supply chain management.Supply chain management involves co-ordinating the logistical activities within the individual links of the logistics chain in such a way that the logistical processes can be managed and can function as an integrated whole, with the support of an integra
47、ted information system. The ultimate goal is to optimise the logistics performance of the complete supply chain.Within the context of supply chain logistics, integration can occur at different levels:(a.)Physical integration. The performance improvement of the primary process is the aim in this stag
48、e. Standardization of consumer and transportation packaging, pallets and roll-containers are examples of physical integration. In Europe 45% of the packaged goods are distributed on standard pallets (Europallet 80 x 120 cm) and in standard-boxes (40 x 60 x 40 cm). At the moment there is a strong ten
49、dency to replace corrugated board by multiple transportation systems (plastic boxes). The organisation of a pool-system for this multi-trip packaging system seems to be a critical success factor.(b.)Information integration. In the second stage of integration the information flow with respect to the primary process is tuned between vendors and suppliers. Electronic Data Interchange (EDI) is a tool, but
