April 2014 | Commentary | Checking In

The Power of Demand-Driven

Tags: Logistics I.T., Supply Chain Management

Felecia Stratton is the editor of Inbound Logistics magazine.

The inbound logistics concept has a lot of pull in today's marketplace—and for good reason. Consignees want control. Having visibility to product and processes at different supply chain touch points empowers you to make smart decisions about positioning and moving inventory.

Companies embrace this enthusiasm for demand-driven practices in countless ways. For example, some importers juggle Incoterms in different regions of the world to dictate carrier preference, transportation pricing, and inventory ownership. Others proactively divert inbound product at ports of entry to match demand expediency with the best mode option. Reducing costs and managing risk are contingent on visibility. Shippers can't control—let alone circumvent—what they don't know. With demand-driven practices, the cost of managing supply chain exceptions is exceptional.

The closer you are to market, the more time is compressed. So the risks of failure are greater because you have less time to react. Control is even more important—whether it's crossdocking to expedite retail replenishment and avoid stockouts, or dynamically routing last-mile shipments to meet delivery demands.

These examples demonstrate the myriad ways demand-driven DNA is woven through the supply chain. The demand-driven concept accommodates strategic business processes such as postponement, and sales and operation planning; but it also guides tactical execution as rudimentary as following an inbound routing guide.

People unfamiliar with the mission of Inbound Logistics—as the first advocate of demand-driven logistics—sometimes challenge us: "Why only inbound? What about outbound?" Our simple answer: "One person's inbound is another person's outbound." A demand-driven organization does not discriminate. Instead, it strives for synchronicity between functions and among partners, ensuring optimal performance. While the demand-driven logistics concept transcends procurement, transportation, warehousing, and sales, the practice interweaves those functions. Demand-driven eschews siloed thinking. It's holistic to the core.

When it comes to execution, however, the "how" often challenges the "why." That's where logistics technology can act as a facilitator. In fact, the demand-driven concept would have withered on the vine without logistics IT. From cloud-based global trade management platforms to SaaS transportation management systems to demand forecasting modules that plug into legacy ERP systems, developers are pushing innovation to help shippers pull supply to demand. Whether sourced directly or through 3PLs, the right mix of solutions can bring value chain partners together, drive communication and collaboration, inspire innovation, increase visibility, and reduce costs.

Our annual logistics technology issue takes a similar cue, highlighting the trends of the day—omni-channel, small data, big data, automation, cloud computing—all of which feature demand-driven strands. Our annual Top 100 Logistics IT Providers recognize the importance of demand-driven logistics. They can help you challenge convention, raise expectations, and perhaps introduce a new question: "What about inbound?"