techwatch
From demand signals
to demand shaping
ALTHOUGH COMPANIES ARE JUST STARTING TO USE
software to decipher demand signals and use the information to
adjust inventories in their supply chains, pioneers are looking
ahead to the next phase: shaping demand. And that could have
major implications for logistics and distribution managers.
Demand, of course, determines inventory and production
needs. But only a few companies have started to put aside forecasts and drive replenishment based on actual demand—
point-of-sale purchases or orders. Algorithms in sophisticated software
take data on those actual “buys” and then recalculate stocking levels at distribution centers, triggering orders
from suppliers further up the pipeline.
In the above scenario, companies are merely
reacting to consumer demand; they are not
prompting the buyer to make a purchase. They
are not shaping demand.
But an emerging class of software has the
intelligence to assess buyer interest and then
formulate offers designed to sway purchasing
behavior. Vendors that offer this type of software include Avercast, DemandPoint, and
ToolsGroup.
Shaping demand is not an entirely new idea.
Companies have engaged in store promotions,
purchase incentives, and marketing campaigns
for some time now. In fact, one consumer company has been doing this online for a number of years—
Amazon.com. When you order a spy novel online from Amazon,
the digital merchant will suggest other titles in that genre. By
appealing to your tastes in literature, the online store tries to get
you to make additional purchases.
While Amazon has done “online demand shaping” in the con-
sumer space, traditional business providers are now starting to eye
this practice as well. At the Council of Supply Chain Management
Professionals’ European conference this past June, Stephen
Garbett described how his company, RS Components, was taking
steps to do demand shaping online. Based in the United Kingdom,
RS is one of the world’s largest distributors of electronics and
industrial products and components. “We want to understand
what the customer is looking for and then
manage the customer expectations,” said
Garbett.
