How do you manage supply and demand volatility in manufacturing?

Supply and demand volatility is one of the biggest challenges for manufacturing operations. It can affect your production planning, inventory management, customer service, and profitability. How can you cope with the uncertainty and fluctuations in your market and supply chain? Here are some strategies to help you manage supply and demand volatility in manufacturing.

1 Forecast accurately

The first step to managing supply and demand volatility is to forecast your demand as accurately as possible. You need to use reliable data sources, historical trends, market research, and customer feedback to predict your future sales and orders. You also need to update your forecast regularly and adjust it based on changing conditions and events. A good forecast can help you plan your production schedule, optimize your inventory levels, and avoid overstocking or understocking.

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Bill Shube

Gaining better supply chain visibility with low-code/no-code analytics and process automation. Note: views are my own and not necessarily shared with my employer.
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Try to forecast accurately, yes - but don't plan to forecast accurately. Forecasts will always be wrong - it's important to understand your forecast error and its statistical distribution. This can help you set your buffer stocks to the appropriate levels to ensure proper service levels - without over-inventorying yourself.

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2 Use flexible production methods

The second step to managing supply and demand volatility is to use flexible production methods that can adapt to the changing demand. You need to have a lean and agile manufacturing system that can reduce waste, improve efficiency, and respond quickly to customer needs. You can use techniques such as modular design, batch production, mass customization, and just-in-time delivery to increase your flexibility and reduce your lead time. You can also use automation, digitalization, and smart technologies to enhance your production capabilities and quality.

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3 Collaborate with your suppliers and customers

The third step to managing supply and demand volatility is to collaborate with your suppliers and customers to create a more resilient and responsive supply chain. You need to communicate effectively with your suppliers and customers to share information, coordinate activities, and align expectations. You can use tools such as cloud-based platforms, data analytics, and blockchain to improve your visibility, transparency, and traceability. You can also establish long-term partnerships, contracts, and agreements with your suppliers and customers to secure your supply and demand.

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4 Diversify your sources and markets

The fourth step to managing supply and demand volatility is to diversify your sources and markets to reduce your risk and increase your opportunities. You need to have multiple suppliers and customers that can provide you with alternative options and backup plans in case of disruptions, shortages, or surges in your supply and demand. You can also explore new markets and segments that can offer you more demand and growth potential. You can use market research, competitive analysis, and customer segmentation to identify and target your new sources and markets.

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5 Build contingency plans

The fifth step to managing supply and demand volatility is to build contingency plans that can help you deal with unexpected situations and emergencies. You need to have a risk management system that can identify, assess, and mitigate the potential threats and impacts of supply and demand volatility. You can use scenarios, simulations, and stress tests to evaluate your preparedness and resilience. You can also have backup resources, reserves, and buffers that can help you cope with the fluctuations and variations in your supply and demand.

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Bill Shube

Gaining better supply chain visibility with low-code/no-code analytics and process automation. Note: views are my own and not necessarily shared with my employer.
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Not all products are equal - understand which ones are the most important ones to service and what the costs of servicing them are. Is it worse to run out of product A or product B? What are the lead time for each? If A is more important than B, but A costs 10x more than B to service, does that change your plans? It's too expensive to have 99% service levels across the board - set your priorities and plan your inventory accordingly.

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6 Monitor and improve your performance

The sixth step to managing supply and demand volatility is to monitor and improve your performance based on your goals and metrics. You need to have a performance measurement system that can track, analyze, and report your key performance indicators (KPIs) related to your supply and demand management. You can use dashboards, reports, and feedback to monitor your progress and performance. You can also use continuous improvement methods, such as Kaizen, Six Sigma, and Lean, to identify and eliminate the root causes of your problems and inefficiencies.

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Bill Shube

Gaining better supply chain visibility with low-code/no-code analytics and process automation. Note: views are my own and not necessarily shared with my employer.
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Overcome the deficiencies of your out-dated ERP with low-code and no-code (LC/NC) analytics and robotic process automation (RPA). Our ERPs often don't do what we need them to do, and we tend to compensate for this with manual workarounds. This often means lots of copy/pasting in spreadsheets and manual button-pushing in your systems. LC/NC and RPA can automate these non-value-adding tasks with little or no input from IT. Solutions such as Alteryx, Parabola, and the Microsoft Power Platform are easy to learn and can deliver huge economic benefits. Automated analytics and processes can yield time savings, prevent lost revenue and identify cost saving opportunities. If you know intermediate Excel, you can learn these tools.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Bill Shube

Gaining better supply chain visibility with low-code/no-code analytics and process automation. Note: views are my own and not necessarily shared with my employer.
Report contribution
Simplify your processes! You can't have an agile and responsive supply chain with overwrought, overly complicated processes. Do your purchase orders go through too many approval steps? Do you spend too much time segmenting and prioritizing your customer orders? Do you nitpick your forecasts ad nauseam? Think about addition by subtraction - how can you make better decisions more quickly by removing complexity?

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How do you manage supply and demand volatility in manufacturing?

1

2

3

4

5

6

7

1 Forecast accurately

2 Use flexible production methods

3 Collaborate with your suppliers and customers

4 Diversify your sources and markets

5 Build contingency plans

6 Monitor and improve your performance

7 Here’s what else to consider

Manufacturing Operations

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How do you manage supply and demand volatility in manufacturing?

1

2

3

4

5

6

7

1 Forecast accurately

2 Use flexible production methods

3 Collaborate with your suppliers and customers

4 Diversify your sources and markets

5 Build contingency plans

6 Monitor and improve your performance

7 Here’s what else to consider

Manufacturing Operations

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