Reaction to “The Supply Chain Becomes the Demand Chain”

• Published date: 01 June 2014
• Author: Brad Barnett
• DOI: http://doi.org/10.1111/jbl.12048
• Date: 01 June 2014

Reaction to “The Supply Chain Becomes the Demand Chain”

Brad Barnett

Adams Golf

I read the article with great interest. The independent work in

academia that is unburdened by the need to deliver short-term

business results is invaluable to the business community. There

are a few topics in the article that I would like to provide context

on, each one colored with my base of experience in branded con-

sumer products and blissfully free of the need to back it up with

rigorous data!

THE CONCEPT OF DEMAND CHAIN

It is clear that today’s consumer continues to drive the need for

speed, mass customization, improved value, immediate gratifica-

tion, etc., out of today’s supply chains. However, how those

consumer demands are met depends almost completely on the

subtleties around the company/brand meeting those demands. My

view is that three primary factors differentiate the impact on

an individual business—scale, complexity, and proximity to the

consumer.

At big box retail, the enormous power the retailer wields

through scale and proximity to the consumer drives suppliers to

meet their needs “or else.”Whether those needs are based on

delivery, inventory investment, margin guarantee, data support,

etc.—the supplier must meet every need to make it to the shelf.

The largest companies who are closest to the consumer can

create the illusion of being demand-driven because they are

meeting the needs for speed and customization through the trans-

fer of risk and complexity onto their suppliers. The appearance

then is that they are demand-driven but in reality when the sup-

ply chain is viewed from raw material to the consumer not much

has truly changed. The same (or more) cash and operating

expense is present in the chain, the end-to-end speed is the same,

etc. What happens is the company closest to the consumer is per-

ceived to have a demand-driven supply chain mostly because of

their leverage to shift burdens to other members of the supply

chain.

CONFLICT BETWEEN DEMAND-DRIVEN AND

EFFICIENCY

In manufacturers of branded consumer products, it is primarily

scale and complexity that drive how demand-driven the business

is. Proximity is less important—most manufacturers are at least

one step removed from the consumer even if they have a B2C

component to their distribution. Companies under $500M in

annual revenue may have the benefit of small scale and control-

lable complexity to structure highly demand-driven supply

chains. Their internal operating structure, culture, etc., inherently

enable speed and flexibility.

Once either high complexity or overall scale exceeds the

deflection point, the need for efficiency and stability will often

drive companies to operate with their default “what’s-worked-in-

the-past”mentality to drive supply chain decisions and capabili-

ties even in the face of the demand-driven consumer environment.

In this situation, the pressure to: (1) deliver today’s results, (2)

show immediate improvement, and (3) meet the next critical

business need, etc., reduces a supply chain’s ability to become

demand-driven.

MARKETING/SUPPLY CHAIN CONNECTION

Without question, there is a direct link in the value chain of the

business between the Marketing and Supply Chain organizations.

In academia, it is critical to teach business professionals the

value chain, key points of interaction, where leverage exists

across the chain to deliver the best results, etc. The more talent

that comes into the business environment with a clear under-

standing of these dynamics, the better business results will be

achieved at improved speed.

On the ground in the current business environment, I think the

effectiveness of this connection is almost entirely based on scale.

In consumer products companies under $500M in annual reve-

nue, the leaders of different functions are often colocated, walk

past their counterparts on a daily basis, exchange important

information immediately via cell phone text message, etc. The

connections are easy and frequent.

Once the company or division moves above $500M in annual

revenue these direct cross-functional connections become more

difficult. At a certain scale, the interaction can become driven by

scheduled meetings, the need to maintain cultural or organiza-

tional protocol in who gets what information when, and the pri-

ority or politics of the moment. At this point, the connection

between Marketing and Supply Chain organizations moves back

into the theoretical arena unless the executive and next-level

leaders are committed to the speed and transparency required to

drive the most effective results for the business.

RESEARCH QUESTION COMMENTARY

1. Integrated business planning. This may be the most important

and broadest impact question in the table. Independent of

Corresponding author:

Brad Barnett, VP Operations, Adams Golf, Plano, TX, USA; E-mail:

bmbarnett@sbcglobal.net

Journal of Business Logistics, 2014, 35(2): 155–156

© Council of Supply Chain Management Professionals