How to develop demand-responsive supply chains

1. Range Forecasting

Range forecasting helps you understand the potential demand for specific products and identify which ones are selling best. This will allow you to decide strategically what new products to add or remove from your supply chain.

Many companies are less capable of forecasting one specific demand figure, so they instead forecast a range to be more adaptable to different market conditions and have a stronger supply chain.

Businesses look at range forecasts to decide how much of a product to contract and what kind of contingency plans to make. Doing so allows them to prepare for any potential outcome within the pre-set boundaries, regardless of whether demand ends on the higher or lower end.

The ideal scenario is for businesses to recognize the certainty of selling products at the lower end of the forecast. At the same time, it prepares them to sell at the higher end of the range when things turn out better than expected. It’s a win-win outcome for all parties.

Be reminded that there’s more to range forecasting than simply a way to set boundaries for potential outcomes. It allows for the development of contingency plans and proactive responses. At the same time, it allows a business to identify any anomalies in its supply chain and act accordingly.

2. Flexible Contracts

Establishing versatile contracts with suppliers and manufacturers becomes easier for companies using range forecasts. The best thing about flexible contracts is that they allow you to sign short-term and fixed-price or long-term contracts with variable pricing.

Likewise, it sets the expectations for supplier performance and gives a company the power to change production depending on customer demand. With flexible contracting, businesses can agree upon and communicate to their suppliers how long it will take for the supplier to increase production to meet the demand.

3. Multi-Sourcing Strategy

Multi-source is described as a business strategy that involves the use of multiple suppliers to fulfill a particular product. It may not be feasible for every company, as large, well-established businesses typically use multi-sourcing.
However, using this strategy allows your business to cover potential supply disruptions at any given time and avoid excess inventory buildup. This allows you to better manage your inventory through a more responsive and flexible supply chain.

Unlike the traditional single-source strategy, which involves using a single supplier for your production needs, multi-sourcing allows multiple suppliers to fulfill the same amount of product demand. It’s a way to reduce risks and have an emergency plan lined up in case one or more suppliers cannot meet their quota.

In essence, it helps you deal with demand fluctuations since there are other supplier options. As such, you’re getting leverage over potential supply disruptions and can better mitigate the effects of any unforeseen events.

Companies that use the right multi-sourcing strategy can prioritize suppliers to accommodate different projected demand levels and activate those suppliers as needed.

4. Supplier Capacity Management Automation

Supplier capacity management automation begins with analyzing your company’s supply chain. Once you’ve identified all your suppliers and manufacturers, it’s time to assess their performance. Using a centralized dashboard, you easily identify potential bottlenecks in the process and adjust accordingly.

To map your supply chain, you must survey your suppliers for capacity information. After collecting data, you can use analytics to focus on high-risk suppliers and items. You can also set thresholds for risk, which will help you monitor events and manage capacity more effectively.

Furthermore, you can use this information to determine your suppliers’ long-term strategies and the appropriate contract terms. Remember that capacity management is not just about adjusting quantities or offering incentives; it’s about figuring out how much and when you need specific supplies.

With the right supplier capacity management automation and a reliable multi-sourcing strategy, your company will be better equipped to deal with supply shortages and demand fluctuations. Ultimately, it will allow you to become more responsive and stay agile in today’s overly competitive landscape.