Getting the Demand Side of Purchasing Right

by Ma. Gloria Talavera

Most businesses can manage the supply side of purchasing. But not everyone knows how to manage the demand side.

It often amazes me how fast-food chains like Jollibee Foods Corporation and KFC ensure that stocks of patties, burgers, and chicken arrive on time so that you and I can be assured of having our favorite meals when we order it.

By contrast, I am quite sure that you’ve experienced being in a restaurant and ordering an advertised meal, only to be told that it’s out of stock.

These situations highlight the need for firms to have a system that will ensure that the company is able to balance the supply and demand of its materials and products so that customer demand will always be satisfied. An emerging strategy that is receiving much attention lately is Supply Chain Management, or SCM.

SCM is a systems approach to managing the entire flow of information, materials, and services, from raw materials suppliers, to factories and warehouses, and down to the end customer. It is founded on three important pillars, including supply management, demand management, and logistics management.

SCM involves the following:

1.Supply chain integration
This involves both internal and external integration.

2.Information sharing
Internal and external integration require partners in the value chain to share critical information such as sales data, materials requirements, lead time, and other relevant information.

3.Trust
SCM will only succeed if the suppliers, the firm, and the customers all trust one another and believe in the critical role that each one plays in order to make their value chain efficient and cost effective.

The full article appears in the September-October 2006 issue of SME Insight, the magazine for small and medium enterprises. For subscriptions, call 759.2022 or 813.4396 loc. 816 or e-mail hipcards@hip.ph.