A systematic and coordinated approach to demand
management is integral to improving supply chain
performance and a necessary prerequisite to improving
many aspects of the physical product flow such as
production scheduling, inventory management and
distribution operations. Fresh foods supply chains are often
considered to be particularly efficient because of the
perishability of the products. This research has shown that
in terms of demand management, even chains in this sector
have significant opportunity to improve the management of
information both within and between companies.
One of the key points emerging from the research was the
level of variability in consumer demand for fresh products
even though intuitively it might be expected that the demand
for many basic food items would be reasonably level. It was
found that some of the variability was due to “natural cause”
such as seasonality or weather but that in practice much was
due to promotional activity. Many Retailers argue that
promotions are necessary either in response to competitor
activities or to create customer interest in the store and hence
generate footfall. Footfall and overall store sales is the major
concern, rather than the impact of promotional activity on the
supply of a particular SKU. This may be the case, but it was
apparent that no retailer had a mechanism to measure the
overall impact of promotions on supply chain cost which
include inventory level, production costs, distribution costs,
and wastage /loss rates.
The development of a comprehensive cost benefit model to
show the impact of promotions on overall profitability would
be a beneficial area of further research.
Irrespective of the causes of variability in consumer
demand, the research showed that in five out of the six
chains studied there was potential benefit from a more
proactive approach to synchronisation of demand along the
chain.
Demand management is a complex and multidimensional
task. It is clear that it requires much more than simply making
consumer sales data available to the whole chain. The analysis
presented in this paper provides a possible framework of
issues that need to be considered in order to achieve more
effective demand management.
On the one hand there are operational maters including the
need to streamline information handling systems, the need to
define relevant data requirements, the need to systematically
and accurately record the required data, and the need for
timely transmission of data between supply chain partners.
On the other hand there are issues related to managing the
nature and characteristics of demand once this is clearly
understood
Having outlined an approach to managing demand in agrifood
supply chains, the issue arises as to who should or will
take responsibility for this activity. Large retailers typically
have anything between 20-40,000 food SKU’s in store, whilst
individual retail buyers may oversee 100 to 300 lines. In
practice therefore it is unlikely that retailers will take the lead
in detailed demand management. Instead the onus is likely to
lay either with individual suppliers who will have a much more
restricted range of product to deal with and a strong vested
interest in those products, or with “category captains” – i.e.
key suppliers nominated by the retailers to coordinate the
activities of a group of suppliers for a particular product
range.
The study presented in this paper has been based on six
value chain case studies. Further research is now required
from different perspectives, disciplinary or functional, to
identify ways in which the change management process can be
implemented to maximum effect. The synchronisation of
demand and supply in agri-food supply chains is a complex
task due to the variability at both ends of the chain. This
paper suggests a process for reducing the variability of
demand throughout the chain and linking demand data more
directly with production decisions upstream.