What Is Demand Chain Management?

Demand chain management is a part of the supply chain in which managers deal both with the supply network and customer service. On the side of customer service, the demand chain management is supposed to check on customer opinion and demand in an effort to keep customers happy. On supply chain side, demand chain management is supposed to help supplies get to the customer and keep supplies at a low cost to improve sales. While this management is supposed to help a business, several misconceptions can ruin effectiveness of the demand chain.

When it comes to selling there are two main chain components, the supply chain and the demand chain. Both of these are under the umbrella of value chain. The demand chain is responsible for marketing, service and sales, so this chain deals mostly with customers. The demand chain can also be composed of retailers and resellers, depending on the business model.

As part of the demand chain management, managers must speak with resellers and sales partners. On this front, talking to sales partners allows the supply chain to change prices or distribution amounts to optimize sales for the resellers. Managers must also speak with customers to ensure satisfaction and that there is still demand for the product. If product demand is decreasing, demand chain management will attempt to improve demand through further advertising and discounts.

Demand chain management software is used to automate the process. This software allows all parts of the value chain to speak to each other and saves customer data such as customer opinion and sales records. By taking these figures, demand chain software will attempt to accurately measure replenishment amounts and order quantity needed by resellers.

There are several advantages to using demand chain management. One is to align all partners’ incentives and opinion. Another is to allow the chain to respond to short-term change. Dramatically changing the supply chain if there are long-term changes is another advantage if communication is carried out properly.

While there are advantages, there also are disadvantages if the demand chain management is not managed correctly. If customer data are incorrect, changes made to the supply chain because of the incorrect data could destroy sales. Some sales partners may avoid communicating with management, because they may find management's interest to be annoying or invasive, which makes it difficult to ascertain data from all sales partners.