For many manufacturers, it's the shape of things to come that matters most.

Identifying and acting upon the next big idea that turns into the next big-selling product is top of mind, especially in high-tech and consumer product goods industries, where product lifecycles are short and supply lead times can be long. Finding the perfect — and profitable — balance between these two conditions is of the utmost importance because making and selling too much of the wrong type of product isn't good for business.

Take Kodak, for example. Several years ago, when it was trying to transition its business from a chemical company that makes film to a consumer electronics company, it heavily promoted an inexpensive digital camera with docking station for printing. As a result of its marketing effort, the cameras were flying off the shelves. It looked like a success, but Kodak started running low on cameras. And, the chipsets it used in the cameras needed to be ordered several months in advance. Suddenly, sales were at a standstill.

"They found that they didn't have their sales and marketing promotion strategy aligned with the production plan," says John Bermudez, senior director of planning product strategy at Oracle Corp., who worked with Kodak to ensure that it didn't repeat this problem.

Using Oracle's Demantra demand management software, Kodak now can track sales at a granular level and shift marketing tactics to pull back on products that "sell themselves" while focusing on areas that require more promotion — such as a more expensive camera — in order to move it off the shelf. This process is what experts call demand shaping, and it is one of the most important aspects of a holistic demand management strategy.

Like Kodak, many manufacturers realize they need to align supply and demand better. And, in some cases, they need to create demand in order to match existing supply. That could mean promoting a product in a two-for-one sale because there is excess inventory or creating incentives around products that are not moving. Companies use technology tools such as demand forecasting, sales and operations planning (S&OP), and supply chain management. But all of those tools fall into the broader category called demand management, which, according to industry experts, is a multi-faceted process.

"Demand management is the superset," Bermudez says. "It is different from planning and forecasting because management has the extra dimension of manipulating demand for the benefit of the company."

According to AMR Research, while forecasting and planning are important spokes in the demand management wheel, manufacturers should be concentrating on demand sensing, demand shaping, and profitable response tactics to gain the visibility and control required to manipulate downstream demand (see sidebar). And while technology in the form of applications like Demantra from Oracle and software from Infor, IBM, Logility, and others, is important, it is only 10% of the demand management equation. Fifty percent of a demand management strategy relates directly to collaboration within the organization and with the supply chain, and 40% is about managing the process.

"The technologies today are good," says Jane Barrett, a research director at AMR. Too often, however, one business leader invests in an application to solve a specific problem associated with one business area. Manufacturers need to adopt corporate-wide standards around the demand management strategy in order to make it a sustainable process that is entrenched within the culture of the company, she says.

Strategic Objective