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Customer Demand Dynamics
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Balancing marketing practices with supply chain capabilities has be­come a critical competitive issue. The explosion of marketing activity and the intensity of consumer demand has thrown many companies' supply chains into a tailspin. Companies must understand the impact of marketing activity on the supply chain, and improve their capability of meeting customer requirements. This paper will begin by discuss­ing how customer demand is changing. From there it will describe the changes in companies' response to demand and the changes in how they go to market with product. As a result of changes in customer needs and product delivery methods, companies must evaluate the bal­ance between their supply chain and customer demand. Out-of-bal-ance supply chains drive added cost to the company and reduce the company's ability to capitalize on increased business. Improving bal­ance may require organizational and process changes as well as changes in information systems.

CHANGES IN CUSTOMER DEMAND

Consumer demand has changed significantly over the past decade. In addition to the demand-creation opportunities the company generates through marketing activities, there are simply more varieties requested by consumers. For example, beer manufacturers have responded to beer drinkers' demands and have given them over 400 brands to choose from. These market shifts have created excellent revenue for compa­nies. However, this consumer windfall has also been some manufac­turers' downfall. Traditional supply chain and manufacturing practices were not originally designed to deliver such variety and complexity. The number of products in supermarkets rose from 13,000 in the early 1980s to over 20,000 by 1990 [1], This proliferation has continued throughout the 1990s. Consumers are now requiring

      speed of delivery

      a variety of products

      convenient access and more flexible procurement

      better service.

Consumers are unwilling to trade quality for these needs. Deliver­ing consumer satisfaction at a profit, which is the main goal of market­ers, is becoming more difficult to achieve. Companies must face the reality that customers are not easy to please and are hard to hold on to.

COMPANIES RESPOND TO CONSUMER NEEDS

The future of meeting demand for many companies will mean going to market by selling direct to consumers. Manufacturers will see the op­portunity to eliminate excess channel complexity and move to contact­ing customers directly. Manufacturers will take on the role currently done by both wholesalers and retailers. Manufacturers will open their own Web sites and allow consumers to order direct. As they gain more knowledge of individual buying preferences, the company will create personal shopping lists and send a monthly package of repeat purchases by mail. Companies, such as Procter & Gamble, may include tooth­paste, mouthwash, shampoo, and other consumables in one shipment direct to the customer's home each month.

The future of marketing will not focus on products but on custom­izing the shopping experience. Custom shopping today may mean vis­iting a Web site that allows consumers to create a custom product. CDuctive Company allows customers to visit a Web site and create a personal music CD-ROM. Other products can be customized through interaction between the customer and the producer. McGraw Hill lets individual professors create a custom textbook by selecting specific chapters tailored to their course. Acumins creates custom vitamins for consumers based on their health and dietary needs. The company can compress up to 95 vitamins and nutritional supplements into three to five customized pills. Build a Bear Company provides a workshop where customers can choose a certain style teddy bear and participate in the stuffing, stitching, fluffing, personalizing, and dressing of the bear.

The future of customer response is moving from mass marketing to micromarketing to reaching segments of one. Dell Computer's ability to deliver custom-configured computers within a few days and Levi's Personal Pair™ program, where a customer's measurements are re­layed electronically to the factory to drive production of custom-sized jeans are examples of reaching individual consumers. Land's End al­lows the shopper to create a personal model based on body measure­ments and hair color and then can suggest custom clothing options flattering to the individual. Bristol-Myers Squibb Company's Clairol Web site allows potential consumers to scan in a picture, then custom­ize their hair color online. As these examples indicate, the future of customer relationships will move beyond delivering on time and in the right quantity and quality to delivering a custom product direct to the consumer's door.

The future of delivering consumer products by Internet rather than by personal attendance means "e-tail" business will replace retail busi­ness. Manufacturers' need the ability to see across the entire supply chain, analyze demand information, and use technology to deliver cus­tomer needs. From a supply chain perspective, companies must meet consumer demand, manage product development, and create a supply chain capable of meeting customer demand.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 11


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