| Demand management is the series of policies and practices that a company uses to get as close a read as possible in terms of how much demand there is for that company's products or services, which in turn determines how much in goods and services it needs to source and procure to meet said external demand. Demand management strives to achieve a balance between available materials and consumption. Simple enough, right? It is in actuality a near-impossible task. Further, the success of this effort involves trust and coordination between multiple trading partners, so that each partner can have clear visibility into what is happening up and down stream. This said, demand management does not so much "nullify" the bullwhip effect as much as it potentially reduces it. Remember, the bullwhip effect is caused by an over-reaction to unanticipated demand signals caused largely by having poor visibility into what might be unstable markets or unforeseen market fluctuations. The ultimate goal is to have such pristine visibility up and down stream so that suppliers can respond to demand in a timely fashion. However, if a demand signal arrives out of nowhere, how can it be assumed that the demand it represents will still exist when suppliers act on a prior signal? More realistically, the best that trading partners can do is to build policies and processes that minimize the potential for bullwhip effect, which is good for all involved. So ideally, a smoothly executed demand management system should be superior to Constant WIP (CONWIP) or even a push-pull hybrid implementation. However, this all assumes clear demand signals (which assumes good collaboration methods), timely sharing of information and plans, and to a certain degree, stable markets. And we're not there yet. |