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RFID to Simplify Demand-Driven Future

AMR Research's Greg Aimi argues that the roadmap to the eventual demand-driven enterprise will be made simpler by the use of RFID technology.
Mar 02, 2006This article was originally published by RFID Update.

March 2, 2006—The goal of a demand-driven business is to profitably respond to demand across its full network of suppliers, the enterprise itself, and its customers. It must accurately sense, interpret, and characterize demand and consumer needs across points of sale and consumption, and be able to respond to critical real-time events, such as stockouts and overstocks. In today's world of fragmented systems and disconnected processes, becoming demand-driven is a difficult task. Within the next 2-3 years, RFID data will play a critical role in this endeavor, providing a level of demand insight data and demand monitoring not available today. Companies should be designing and investing today to take advantage of this new level of information and the measures that it will provide.

Here's how the pioneers are organizing.

In a more mature demand-driven environment, transformed companies will translate demand insights into demand-shaping activities such as more dynamically restructuring media and advertising spending to influence the buying public. This isn't some exotic future prediction. In the next three years, consumer products companies will have to be able to sense and respond to demand insights if they want to remain competitive. This is going to require strategic IT investments, of which RFID data will be a critical component.

Where are they investing?

So where should investments be made for downstream data and process developments?
  • Development of a demand-signal repository and the automated collection of demand data from customer-facing sources like collaborative planning, forecasting, and replenishment (CPFR), POS, and VMI. These are getting the most attention today, but being ready for RFID as it increasingly becomes available will be key.
  • Performance management analytics measuring supply chain metrics, such as response flexibility, speed, and inventory levels.
  • Perpetual inventory min/max visibility with pull-based replenishment synchronization taking place across suppliers, manufacturers, and customers.
  • Event-based visibility system for real-time exposure of outside-in events such as stockouts, promotions, and product launch performance.
  • High performance analytics and consolidated demand data to deliver the demand visibility, insights, and intelligence necessary to deliver profitable perfect orders, create and shape demand, and guide innovation.
Much of this data can be gathered from various sources today but in highly varied forms. RFID promises to synchronize and simplify the data collection process dramatically.

The journey isn't easy. It requires cross-functional change, which involves the extended supply chain team -- suppliers, procurement, logistics, and manufacturing, as well as commercial-facing functions, including sales, marketing, and even customers. Underlying it all is an IT platform that will enable the enterprise transformation.

The top retailers and manufacturers are doing this today. Their response mechanisms are based on the customer and segmented by channel, with manufacturers prioritizing the top five customers and product categories. With data synchronized, these companies can create coordinated and effective response processes.

This lays the foundation for deeper insights into real customer-oriented performance management gain that will be made that much easier when RFID data is readily flowing bi-directionally across the integrated supply chain. What we'll get from that capability will be a new level of insight and intelligence into consumer behaviors, demographics, and product demand. The synchronized demand-driven organization will be a new breed of profitable market leader that will leave the rest of the unprepared field incapable with keeping up.
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