Supply constraints? Demand-shaping revisited

This is an excerpt of the original article. It was written for the March-April 2024 edition of Supply Chain Management Review. The full article is available to current subscribers.

March-April 2024

Part of any supply chain manager’s job is risk mitigation. Thanks to COVID-19 and the ensuing, and constant, disruptions that have followed, more companies are now focused on reducing their exposure to supply chain chaos. We’ve heard a lot about diversification in recent years—having multiple suppliers in multiple locations. But risk mitigation goes far beyond diversification, and the recent case of Boeing should serve as a cautionary tale not to avoid those other risks.

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This column topic was originally discussed in my November 2013 Insights column. “Demand-shaping with supply in mind” dealt with activities that are primarily the responsibility of marketing and sales management. However, while not responsible for demand-shaping per se, supply planning managers ought to play two, not just one, important roles. Of course, the first of these is ensuring that supply is in place to meet all anticipated future unconstrained demand. The second, often overlooked, is advocating that “demand-shaping be done with supply in mind” whenever there are significant supply shortages. This role involves a better alignment of demand with potential on-hand, on-order, and procurable supply. Largely aimed at increasing profitability, revenue and asset utilization. Instead of just matching supply demand with no objective in mind.

Pull versus push supply chains

In 1998, at one of my first talks at a supply chain conference, I discussed the concepts of manufacturing “push” versus consumer “pull” supply chains. Back in the day, manufacturing organizations had a long history of pushing out finished goods for sales & marketing organizations to sell. Too often not considering what consumers might really demand. At the time I often used the phrase that supply chains were moving from “selling what one makes, to selling what one expects to sell.” Prior to the adoption of sales and operations planning (S&OP) processes in the mid-1980s, manufacturing planners would not give much credence to sales plans nor forecasts. S&OP’s use of an independent baseline unconstrained demand forecast, to start the S&OP process, created a trend away from push and toward pull supply chains—later termed demand-driven supply chains.

Future supply will require push as well as pull

For the most part, today’s supply-side planning processes are pull-based and assume that infinite supply is obtainable. They are focused on matching supply plans to meet unconstrained demand forecasts. Therefore, for example, once production and inventory plans are set, these …

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