Companies in manufacturing, distribution, and retail segments are striving to be more demand-driven, allowing actual demand to pull inventory through the supply chain. For those using traditional supply chain management practices, other corporate strategies – along with some outside forces – make it a challenge to create a truly demand-driven supply and distribution network.
 
Matching supply with demand is a dynamic process that this study by analyst firm Industry Directives suggests few have yet mastered. New geographic and demographic groups selecting from a wide range of products makes traditional forecasting by category, product family, or channel less effective. As market cycles accelerate, supply chains lengthen and go global, and products proliferate. Despite using forecasting software, most respondents’ forecast accuracy is less than 80% over even a three-month horizon. When statistical forecasting is not enough, inventory management can ensure that appropriate levels of stock are in place to address forecasted demand, forecast error and uncertainty in demand and supply.
 
Most respondents to this study are still using relatively traditional techniques: reviewing processes and performance, inventory and service level targets infrequently. Top performing companies in the study are more likely to use applications that support dynamic, demand-driven response.
 
Distribution-intensive companies must change how they do business and take a new and important approach to inventory management. Some companies are already making great strides and gaining a competitive advantage over those stuck using more traditional practices.