Demand driven MRP is a strategic business decision that aims at establishing and maintaining long-term profitability. It integrates all aspects of the supply chain including production, transportation, logistics, sales and service. This process helps businesses in determining the critical areas that require additional investment. With the advent of the Internet and increased online transactions demand for improved methods of delivering customer services has increased. Businesses have therefore begun to look for ways of streamlining their business processes and using advanced tools and software applications to streamline their operations.
Supply chain planning, however, is a very complex process. In order to make use of advanced tools and applications, it is necessary for businesses to adopt advanced approaches that deal specifically with demand-driven supply chain planning. It is a vital step as it involves dealing with very delicate issues that can threaten the profitability of a company. To this end only those businesses that possess comprehensive demand planning processes are able to ensure that they remain on the leading edges of business activities.
There are many advantages associated with demand-driven supply chain planning. The key advantage is the reduction in costs involved in the process. Companies that make use of these strategies stand to enjoy a number of significant cost reductions. Transportation costs and other overhead expenses are reduced, leading to considerable overall cost saving. Also, with demand driven supply chain planning, there is a marked reduction in material waste, which allows a company to significantly reduce its environmental impact.
Another important advantage is the ability to plan for contingencies. This basically means that a company can plan for any situation. For example, a situation may arise when a particular product is not in demand. When such a situation arises, companies can still plan appropriately by changing the focus of their business to another product. Also, should demand fail to remain constant, then companies are capable of switching to another product that offers a higher level of demand. In addition, in most cases there is no need to maintain inventory at levels that may be beyond the capacity of the business.
Demand planning allows companies the opportunity to establish realistic expectations for the future. This facilitates a well-planned and orderly process for delivering goods and services. By establishing realistic expectations, companies also have an easier time adjusting to changes in demand. Such adjustments enable companies to successfully meet the demands of their customers.
Another advantage of demand planning is that it helps in improving customer satisfaction. This is because it focuses on meeting the needs of customers. The process involves identifying what products and services satisfy the needs of customers and mapping these needs against projected demand. In so doing, the planning process also helps in improving customer loyalty. This is because customers will be satisfied with products and services delivered by companies that employ the right planning principles.
A successful supply chain, on the other hand, ensures that products are bought at the most optimal cost, thereby allowing businesses to maximize revenues. Thus, planning is important in ensuring that companies take maximum advantage of the opportunities available in supply. It helps them make the most of short-term and long-term trends. For instance, a surge in the demand for particular products can drive down prices. Thus, a company can make use of this situation to sell its products at a cheaper rate.
In order for demand-driven supply-chain processes to be successful, companies need to properly identify their customer’s needs and expectations. They also need to take account of the future projections of demand. This is because demand predictions are often inaccurate, and they can substantially affect companies’ bottom line.