Manufacturers have long realized that sales forecasts are, for the most part, volatile predictions or mere guesses. Granted, some forecasts are more educated or advanced than others, but no matter how sophisticated a company’s forecasting system may be, many manufacturers still get caught unaware sooner or later.

Turning out products based on forecasts can result in too much or too little inventory. Likewise, determining production volumes based on material availability or on manufacturing capacity can also result in erratic or inefficient inventory management.

Consequently, traditional supply-driven manufacturing is fast becoming the dinosaur practice of the industry. Today, smart companies are repositioning their supply chains to respond to the immediate demands of customers, as well as to rapid industry shifts in supply. This move, called demand-driven manufacturing, represents direct responsiveness to the marketplace, and it’s fast becoming the future.

Visibility at every point
Demand-driven manufacturing aligns an organization’s entire supply chain—sourcing, production, sales—so as to specifically respond to what the customer orders, in practically real time. Consequently, instead of pushing ready-made product to the marketplace as directed by forecasts, manufacturers can pull materials and services from suppliers to then meet actual customer demand.

A synchronized and well-integrated supply chain is at the heart of demand-driven manufacturing. It requires tools, technology, and reengineered connections that can replace surplus inventory with information. By establishing and extending visibility at every point along the supply chain, manufacturers can maximize their abilities to alter manufacturing and distribution schedules with demand changes.

But the demand-driven approach doesn’t just give manufacturers detailed visibility into inbound and outbound materials. It gives them even greater insight and control by linking the customer with the supplier in real time. This way, as customer demands change, suppliers also receive direct vision into those changing demands. Because of this important connection, manufacturers are then able to reduce the time it takes to obtain raw goods from their suppliers. This ultimately lets companies improve the certainty of order fulfillment and increase customer satisfaction by giving customers what they want, when they need it. 

The benefits of the demand-driven approach are immediately obvious and include the ability to reduce response times, or bring products to market faster. Having greater levels of responsiveness allows companies to quickly adapt to rapidly changing market needs. Of course, because demand-driven manufacturers are reacting to purchase orders instead of forecasts, the capacity to deliver products as ordered is also vastly improved.

Fewer mistakes, faster delivery
Customers keep changing, and demand fluctuates day-by-day, order-by-order. Given today’s high-speed and ever-changing marketplace, manufacturers must leverage every link in their supply chains. While most companies are focused on improving efficiencies, they must do more. Making practices more efficient is certainly one way to work toward a competitive advantage, but a demand-driven supply chain is a more significant reach for the market lead. Its real advantage lies in connecting all production activities to demand, and in sharing real-time information throughout the chain. The result is the ability to manufacture all the right products at just the right times.