If you don’t manage supply and demand, you’re putting your business at risk. Service providers can become uncertain when there is poor demand management. Having too little or too much product can both have negative effects along the supply chain.
Excess Capacity
Excess capacity can sometimes be used to meet demands, but most of the time it creates cost without value. Customers are not willing to pay for products to just sit. Even though on some level having extra is useful and it might even help provide some assurance along the supply chain.
Insufficient Capacity
Having insufficient capacity due to lack of demand management can also be detrimental. It can often stand between you and true growth. Customers who do not feel certain the product will be available to meet the demand will be uncertain when it comes to plans, coordination, forecasts, and service level agreements.
Predicting Impacts on Demand
Demand management brings security for everyone along the supply chain. Customers are more likely to order when they know products are available. It’s important to understand how to both create demand and fulfill it. This, of course, includes understanding the process thoroughly so that when there is a change, you’ll be able to make appropriate adjustments. Of course, this only comes when you are able to accurately predict what the impact will be on the demand.When these are understood the business can:
- Design services to meet demand
- Forecast service designs based on patterns
- Invest in additional capacity
- Adjust the allocation of resources and services
- Identify opportunities to consolidate by identifying demand patterns
- Manage incentives in order to increase demand