The ideal markets situation for a perfect market often materializes when the demand and supply forces are at equilibrium. This means that the quantity of products demanded by the market equates to the quantity of products supplied to the market by the suppliers concerned. Business organizations also need to operate under an ideal situation of a perfect market in order for them to optimize the use of production resources with the main aim of achieving their organizational goals and objectives. This is because optimal allocation and usage of resources in an organization ensures there is neither overproduction nor underproduction. Under this situation, the products that are supplied by a firm to the market are often consumed entirely by the buyers without cases of shortages or excess production. In order to achieve this, there is a need for the demand and supply integration aimed at optimizing the resources allocated to a business organization.
According to Moon (2015), the demand and supply integration is “a process that when implemented by a business organization functions in order to create plans aimed at making decisions that will achieve an equilibrium state and optimal allocation of business resources”. It is, therefore, a process that occurs in steps within an organization that is efficiently coordinated. These processes include financial planning, ensuring that the business funds are properly budgeted for, demand planning, supply planning, and inventory planning, all of which should always satisfy the quantity demanded by the market. These processes are in turn used to create plans during the process of decision making. The plans made should always aim at providing an equilibrium in the supply and demand functions of the firm through the optimal allocation of resources by the organization. The three basic elements of the demand and supply integration process can thus be summarized as the organization’s culture, the process of production adopted by the firm which includes allocation of resources and the tools which represent the different factors of production including capital, land, labor and entrepreneurship.
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The implementation of a demand and supply integration process is guided by three core principles, and these are aimed at achieving the effective and optimal allocation of resources. These principles state that a demand and supply integration process, first should be demand driven, and that secondly, it should be collaborative whilst lastly, it should be disciplined for the successful realization of the implementation process (Moon, 2015). The demand driven principle requires that the supply chain should be determined by the voice of the demand. The customers should, therefore, determine the quantity of products supplied to the market by the organization. Despite the fact that the customer's voice is not always well presented, this voice should still determine the supply chains.
The collaborative principle of demand and supply integration requires that the resources used in decision making be sourced from both internal and external sources. The internal sources of information used in decision making include finance, marketing, purchases, and logistics while customers and suppliers represent the external sources of information. This culture of collaboration ensures that all the parties involved in the process of demand and supply integration provide accurate and useful information in the process.
The third principle in demand and supply integration requires that the process should be disciplined. This means that all of the requirements and processes involved in the implementation of the demand and supply integration should be effective and strictly adhered to. This includes abiding by the other principals of implementing the process, choosing the right people to handle the implementation process and proper planning of the agendas that are supposed to be executed. The three principles if properly adhered to, results into a successfully implemented demand and supply integration process that will ensure the resources of the organization are utilized optimally and efficiently for the realization of an equilibrium demand and supply integration.
In addition to the principles that guide the implementation of a demand and supply integration process, there are key components that should be adhered to for the process to work effectively. The five key components include portfolio and product review, demand and supply review, reconciliation review, and executive review. The portfolio and product review function as an input is used in demand review because the product may undergo changes in the course of the production process. Product review, therefore, influences the quantity of demand. The demand review is the second component of an effective demand and supply integration. This is because demand review provides critical information on the historical manufacturing capacity of the firm which also determines the average quantity demanded. The purposes of the supply review on the other hand aimed at arriving at a capacity forecast (Dominic, 2012). This is often aimed at supplying an optimal amount of products to the market that meets the demand entirely without shortages or excesses.
Reconciliation review is also a component of an effective demand and supply integration. This component functions to reconcile the demand and supply review. This not only helps the business organization to determine the quantity demanded or quantity supplied to the market but also make production decisions that are effective while planning the business. Lastly, the executive review is the final component of the demand and supply integration. According to Dominic (2012), this review is usually undertaken by the business management whose function is mainly reviewing the business’ performance. This determines whether the business has achieved its set objectives since the implementation of the demand and supply integration process. A good integration process should, therefore, be aimed at achieving the optimal resource allocation objective by the business organization.
The success or failure of a demand and supply integration process can be determined by analyzing the characteristics of a successful process. An organization which portrays these attributes is often considered to have implemented a successful process while one that does not is considered ineffective. The successful implementation of a demand and supply integration process is one that is led by the business unit executive (Park, 2014). This ensures reconciliation from both the demand and supply sides. A poorly integrated process is one that is led either by the supply chain or demand chain, each in exclusivity. Engagement from the sales and from the marketing sides, therefore, leads to engagement thus, a successful process. This also ensures that the accountability for every step in the process implementation is determined by the top management. This is often achieved during the executive review. The top management conducts the executive review and is responsible for the decisions made in the implementation process thereafter to avoid blames in the course of the process implementation.
According to Park (2014), the successful implementation of the demand and supply integration is, therefore, one that recognizes the process as an initiative used to run the whole business as opposed to only running the supply chain. This is because the information and systems implemented in the process, therefore, determine the success of the whole organization.
The issue experienced by the shoe manufacturers mostly has to deal with the lack of an equilibrium state between the quantity produced by the firm and the quantity demanded by the market. This has led to shortages in products demanded by the market. The shoe manufacturers should recommend the implementation of a demand and supply integration process and incorporate it in their top management functions. The management should also outsource information from within the factory and from external sources in order to implement a successful integration process. With a successfully incorporated demand and supply integration, the firm will utilize its resource optimally and reach a reach of demand and supply equilibrium to avoid the cases shortages of the shoes demanded.
Dominic, C. (2012). Supply and Demand Chain Integration: A Case Study Conducted in the Packaging Industry. Packaging Technology and Science , [online] 26(1), pp.51-63. Available at: http://dx.doi.org/10.1002/pts.1963 [Accessed 22 Feb. 2017].
Moon, M. (2015). Demand and supply integration . [Place of publication not identified]: Financial Times Prentice.
Park, Y. (2014). Integration of Supply and Demand Chain in Emerging Markets. Journal of Business and Economics , [online] 5(12), pp.2282-2293. Available at: http://dx.doi.org/10.15341/jbe(2155-7950)/12.05.2014/009 [Accessed 22 Feb. 2017]