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DSI Across the Supply Chain

Up until now, we have talked about the need to integrate demand and supply within a single enterprise. In other words, how can insights about demand levels that might be housed in sales or marketing be shared with those who need to plan the supply chain? DSI processes are the answer. However, the ideal state of DSI doesn’t need to be limited to information sharing within a single enterprise. Figure 1-2 represents a vision of how DSI can be expanded to encompass an entire supply chain.

Figure 1.2

Figure 1-2. Demand/Supply Integration across the supply chain

Figure 1-2’s representation of DSI is a simpler version of Figure 1-1 depicted in a simplified supply chain. The straight, vertical arrows show the possibilities for collaboration. First consider the arrow that leads from the customer’s “Demand Plan” to the manufacturer’s “Demand Forecast.” Imagine, for example, that the “customer” in Figure 1-2 is a computer company, and the “manufacturer” is a company that produces microprocessors for the computer industry. The computer company’s demand plan will include various promotional activities that it plans to execute in future time periods to take advantage of market opportunities. The manufacturer, the microprocessor company, would benefit from knowing about these promotional activities, because it could then be able to anticipate increases in demand from this customer. Such knowledge would be incorporated into the demand forecast for the microprocessor company.

Next consider the arrow that points from the manufacturer’s “Operational Plan” to the customer’s “Capacity Forecast.” When the microprocessor company completes its DSI process, one output is an operational plan that articulates the quantity of a particular microprocessor that it intends to manufacture in future time periods. The customer, the computer company, would benefit from knowing this anticipated manufacturing quantity, particularly if it means that the microprocessor company will not be able to provide as much product as the computer company would like to have. Such a shortage would need to be a part of the computer company’s capacity forecast, because this shortage will influence the results of the DSI process at the computer company. Thus, the outputs of the DSI processes at one level of the supply chain can, and should, become part of the inputs to the DSI process at other levels of the supply chain.

This same logic would apply if the “customer” were a retailer and the “manufacturer” were a company that sold its products through retail. The retailer’s promotional activity, as articulated in the retailer’s demand plan, is critical input to the manufacturer’s demand forecast. Also, the manufacturer’s projected build schedule, as articulated in the manufacturer’s operational plan, is critical input to the retailer’s capacity forecast. Companies use a variety of mechanisms to support this level of collaboration across the supply chain. These mechanisms can be as simple as a formal forecast being transmitted from the “customer” to the “manufacturer” on a regular basis. The mechanism can also be much more formalized, and conform to the Collaborative Planning, Forecasting, and Replenishment (CPFR) protocol as articulated by Voluntary Interindustry Commerce Solutions (VICS). Regardless of how this collaboration is executed, the potential exists for significant enhancements to overall supply chain effectiveness when DSI processes are implemented across multiple levels of the supply chain.

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