Research Proposal:

Demand Management: An Assessment of Demand Management Strategies in

Various Industries

-Prestline Jose(B2147)

Background and Rationale of the Study

In the growing world of experience economy and consumerism, the products demanded by
customers mostly overwhelm their supply. This places businesses in a difficult position to
manage demand. Confusing choices and tough decisions have to be taken. Demand management
is measured essential to any business plan, including investment analysis for any business
operation. With the aid of precise demand forecast, it is achievable to plan sufficiently for future
events. It equips the business organization with the aptitude needed to persuade its customers and
efficiently handle its assets concurrently.

Demand management is very much interlinked with yield management which guides decision
makers on how to allocate undifferentiated units of capacity to available demand in such a way
as to maximize profit or revenue. The problem then becomes one of the determining how much
to sell at what price and to which market segment.

Although the concept of demand management originated with the reservation system and ticket
pricing in the airline industry, it soon spread to other domains such as Transport Demand
Management (TDM), food demand management, hotel reservation, hospital management etc.
With the burgeoning population, their unlimited wants and massive depletion of various
resources has made demand management a need of the hour.

General objective

To study the impact of demand management strategies in various domains. This will help us to
zero down on those strategies which are most effective in particular industries thereby serving as
a guide for decision makers.

Specific Objective:

i. To study the differing impact of various demand management strategies.

 ii. To conduct industry-wise analysis of the demand management strategies adopted.
iii. To develop metrics that can be used to evaluate the performance of demand
management
iv. To study the use of Enterprise Resource Planning (ERP) to assist in the demand
management process.
v. To explore the possibility of applying blockchain technology for demand
management

Review of Literature

The demand management process is concerned with balancing the customer requirements with
its capabilities of the supply chain. This includes forecasting demand and synchronizing it with
production, procurement and distribution capabilities (Croxton, Lambert, Garcia-Dastugue and
Rogers, 2002).

Definitions of Demand Management

Author Definition
Croxton (2008) Supply chain process composed of operational and strategic subprocesses
that focus on determining sales forecasting, synchronize it with the
production capacity of the company and the chain, incorporate the
company strategy, and map customer needs.
Hilletofth and Alignment of demand creation and demand fulfillment processes within
Ericsson (2007); the internal functions of a particular company and across companies
Juttner, within the chain thus exploring the synergies between market and SCM
Christopher and aiming at obtaining competitive advantages
Baker
(2007); Walters
(2006); Rainbird
(2004)

Mentzer, Moon, An element of the supply chain management. Creation of a coordinated

Estampe and demand flow between the members of the supply chain network and their
Margolis markets.
 (2007)

Rainbird (2004) Understanding of the current and future customer expectations, market
characteristics, and available alternative responses that result from
operational processes.

Demand management framework

Demand management Authors Demand management framework

framework description

Esper, Ellinger, Suggest that the success of the supply

Stank, Flint and chain in creating customer value requires
Moon an extensive integration between the
(2010) processes focused on demand and those
focused on supply.

Juttner, Demand management is composed

Demand Christopher and of the processes of demand creation and
management as an integration Baker (2007); demand fulfillment, and the coordination
of marketing and supply Hilletofth and of these processes through the
chain management Ericsson collaboration of the two areas is
(2009) necessary.

Smith, Andraski Demand management as the integration

and Fawcett of Sales and Operations Planning
(2010) (S&OP) and Collaborative Planning,
Forecasting and Replenishment (CPFR).
Demand Demand management as a process of
management as a process or Croxton supply chain management emphasizing
an element of supply chain (2008) the need to implement operational and
 management strategic sub-processes
focusing on understanding, influencing,
and managing customers’ demand
achieving a fast response throughout the
supply chain.

Mentzer, Moon, Demand management is the creation of a

Estampe and coordinated demand flow between the
Margolis (2007) members of the supply chain and their
markets. They consider demand
management as an element of supply
chain management encompassing
marketing and its coordination between
the agents in the supply chain (internal
and external) and demand planning

Components of Effective Demand Management

The broad-view model of demand management consists of the following elements:

i. Planning demand which involves more than just forecasting.

ii. Communicating demand which includes communicating the demand plan to the
supply and finance organizations and increasingly, to supply chain partners.
iii. Influencing demand which includes marketing and selling tactics, product positioning
demand, which includes managing customer order to meet available supply.

Summary of the Best Practices for Demand Management

i. The demand management process involves more than just forecasting. It encompasses
planning demand, communicating demand, influencing demand and managing and
prioritizing demand.
ii. There is the recognition that demand is the result of marketing and sales efforts.
iii. The focus of demand management is to generate demand in a way that meets the
company’s goals and objectives.
iv. Demand forecasting accuracy is dependent on the understanding of the markets and
customer expectations, as well as the company’s ability to execute marketing and
sales tactics.
v. The demand forecast is based on future expectations of demand, not future shipment
expectations.
vi. The consensus demand plan represents a commitment by the marketing and sales
organization to execute the necessary marketing and sales activities to achieve the
plan.
vii. The demand management is an ongoing process, not a periodic event.
viii. Marketing and sales management own and lead the demand management process.
ix. The demand plan is communicated in terms that are meaningful for the supply and
finance of the organization.
x. The demand plan is used as the basis for developing the finance and supply project.
(Palmatier and Crum, 2003)

Strategic Levers of Demand or Yield Management

Sticking along with the basic strategies, Professor Sheryl E. Rimes of Cornell University

and Richard B. Chase of the University of Southern California classified all yield

management strategies based on two components: pricing and duration of customer use.

Accordingly, prices can be fixed (one price for the same service for all customers for all

times) or variable (different prices for different times or for different segments) and

duration can be predictable or unpredictable.

Performance Metrics for Demand Management

Supply chain network performs an integral portion in assisting the firms in handling demand
management. Hence performance metrics for supply chain members offers insights into
effectiveness of demand management strategies as well.

Supply Chain Metrics:

The performance of supply chains is measured on three key dimensions:

• Service

• Assets

• Speed

Service relates to the ability to anticipate, capture and fulfill customer demand with personalized
products and on-time delivery; Assets involve anything with commercial value, primarily
inventory and cash; and Speed includes metrics which are time-related – they track
responsiveness and velocity of execution.
 i. Service Metrics

The basic premise for service metrics is to measure how well the customers are served

Customer Service Metrics

Build to Stock (BTS) Build to Order

Line Item Fill Rate Quoted Customer Response Time
Complete Order Fill Rate Percentage On-Time Completion
Delivery Process on Time Delivery Process on Time
Value of Backordered /Lost Sales Value of Late Orders
Number of Backorders Number of Late Orders

ii. Inventory Metrics

The major asset involved in supply chains is inventory throughout the chain. The two metrics
generally used for inventory are:

• Monetary Value ($, Yen, Euro, et cetera)

• Time Supply or Inventory Turns:

Inventory Turnover Ratio = Cost of goods sold/Inventory Value

The Time Supply or Turns measures relate to inventory flows; the Value of inventory relates to
inventory as an asset on the firm’s Balance Sheet

iii. Speed Metrics

There are a series of metrics related to timeliness, speed, responsiveness and flexibility.
• Cycle (flow) Time at a Node
• Supply Chain Cycle Time
• Cash Conversion Cycle
• “Upside” Flexibility

(Hausman, 2002)

Blockchain Technology and Demand Management

By analyzing the business requirements and the current readiness of demand management
integration there seemed to be a significant gap in many functionalities. This was an interesting
finding, as intermediates (EDI operators) including banks (SWIFT operators) have been
operating and collaborating in this area over two decades, but services still lack some
fundamental functionalities (e.g., standards, timestamping of transactions, monitoring and
tracking of information flows and secure end-to-end delivery of information). An analysis
showed many of these missing functionalities to be embedded in blockchain technology. From
an academic perspective, many-to-many integration models like private cloud (ERP/Hub
companies), public cloud (ERP/SME) and public cloud (Intermediate/Blockchain) are the most
cost-effective integration models. This supports the theory of transaction cost economics, in
which companies make “buy” decisions and outsource operations to the market. The open source
blockchain technology seems to offer functionalities beyond those of current legacy
technologies; additionally, this technology offers data security and cost-effective transmission of
transactions in peer-to-peer networks with no central system. In this way, blockchain technology
simplifies B2B integration and enables micro level IoT integration (Korpela, Hallikas and
Dahlberg, 2017).

Research Gap

From the literature review, it is evident that extensive research has been conducted in proposing
ways to manage demand in specific industries such as airlines, hotels, transportation, food,
energy, water etc. In the light of this, the proposal is aimed at analyzing the effectiveness of
various demand management strategies on the basis of various performance metrics which have
been postulated. Performance metrics vary depending on the aggregation level at which metrics
are computed. The most common error measurements look at deviations from actuals such as
mean deviation, standard deviation etc. However, on the outlook, the team should understand
how demand management can influence key performance metrics that directly affect the firm’s
financial performance, as measured by Economic Value Added (EVA). It also aims to explore
the possibility of using technological innovations such as Enterprise Resource Planning (ERP)
and blockchain to ease and aid the process of demand management.

Intended methodology
 i. Type of study: Descriptive and Explanatory
ii. Area of Study: Demand management strategies and its application in various
industries
iii. Population and Sample: Samples from companies in industries such as airlines,
hotels, energy, water and food will be considered.
iv. Data collection and proposed tools: Data will be collected through secondary sources
such as research publications, reports available with companies. Further insights will
be gathered by means of interviews with experts.

Method of Data Analysis

The proposed study aims to follow a mix of quantitative and qualitative approach. The
effectiveness of demand management strategies will be analyzed with the help of
performance metrics whereas the scope of blockchain and ERP will be analyzed
qualitatively.

Action Plan

Literature review - 6 months

Data Collection - 6 months
Data analysis and interpretation - 6 months
Report writing & Submission - 6 months
-----------------------------
24 months

======================

References

i. Croxton, K.L., Lambert D.M., Garcia-Dastugue, S., & Rogers, D. (2002). The
Demand Management Process. The International Journal of Logistics Management,
DOI: 10.1108/09574090210806423
ii. Lambert D.M., Garcia-Dastugue, S. & Croxton, K.L. (2008). The Role of Logistics in
the Cross-Functional Implementation of Supply Chain Management. Journal of
Business Logistics, 29(1). Pp 113-132
iii. Hilletofth P. & Ericsson, D. (2007). Demand Chain Management: Next Generation of
Logistics Management, Conradi Research Review, 4(2)
iv. Juttner, U., Christopher, M., & Baker, S. (2007) Demand Chain Management-
Integrating Marketing and Supply Chain Management. Industrial Marketing
Management, 36(3). Pp 377-392
v. Rainbird, M. (2004). Demand and Supply Chains: The Value Catalyst. International
Journal of Physical Distribution and Logistics Management, 34(3/4). Pp 230-250
vi. Walters, D. (2006). Demand Chain Effectiveness- Supply Chain Effectiveness: A
Role of Enterprise Information Management. Journal of Enterprise Information
Management, 19(3). Pp 246-261
vii. Mentzer, J.T., Moon M.A., Estampe, D. & Margolis, G. (2007) Demand
Management. Handbook of Global Supply Chain Management, pp 65-85
viii. Esper, T.L., Ellinger, A.E., Stank, T.P., Flint, D.J. & Moon, M. (2010). Demand and
Supply Integration: A Conceptual Framework of Value Creation Through Knowledge
Management. Journal of the Academy of Marketing Science, 38(1). Pp 5-18
ix. Smith, L., Andraski, J.C. & Fawcett S.E. (2010). Integrated Business Planning: A
Roadmap to Linking S&OP and CPFR. Journal of Business Forecasting, 29(4)
x. Crum, C. & Palmatier, G.E., (2003), Demand Management Best Practices: Process,
Principles and Collaboration, J. Ross Publishing
xi. Kimes, E.B. & Chase, R. (1998). The Strategic Levers of Yield Management. Cornell
University School of Hotel Administration-The Scholarly Commons
xii. Hausman, W.H. (2002). Supply Chain Performance Metrics. Management Science
and Engineering Department-Stanford University, Kluwer Academic Publishers
xiii. Korpela, K., Hallikas, J. & Dahlberg, T. (2017). Digital Supply Chain Transformation
toward Blockchain Integration. Proceedings of the 50th Hawaii International
Conference on System Sciences