Disrupt demand – from MHD magazine

Tom Enright

Highly predictable future demand is the dream of most supply chain executives, all striving for an effective end-to-end supply chain. Companies have long struggled with average forecast errors of more than 27 per cent, according to a Gartner survey.
This challenge will only become tougher as supply chains become increasingly disrupted by new competitors, new business models and digitalisation. Demand will also shift to parts of the world where companies don’t have mature infrastructures.
You’ll need to improve your demand-sensing, shaping and forecasting capabilities to be successful. Move away from owning assets. Instead, move toward accessing and using them through implementing more collaborative supply chain network designs.

“You’ll need to improve your demand-sensing, shaping and forecasting capabilities to be successful.”

New opportunities to better predict demand
The sheer volume of data currently available is greater than most current demand technology can absorb and use for effective insight and decision making. This data needs to be used in a different way than it is today to improve demand planning and forecasting.
Improving demand accuracy is now intrinsically linked to the use of analytics to recreate the environment in which historical demand occurred. This means including more inputs than those of sales, inventory and variable prices in statistical forecasting today, which don’t sufficiently create a comprehensive set of attributes that influence historical demand.
Instead, elements such as weather, social commentary, demand transfer, competitor pricing, and shipping and returns policies need to become inputs to demand calculations. All of these influence how customers purchase, whether in B2B or B2C environments, across multiple industries. All of these elements should be considered when predicting future demand.
This new set of data inputs need advanced machine learning algorithms to learn from richer historical data to sense demand, predict and prescribe action. Unlike statistical forecasting, a machine learning approach uses a wider variety of data inputs, which can produce a more accurate demand plan.
Viewing technology as a source of competitive advantage is critical to understand the impact of disrupting demand for people, products and services, as well as appropriately reacting to it.

“Wealth and demand for products and services will increasingly shift to parts of the world where companies lack mature infrastructure in terms of sales, supply and recruitment.”

Participate in trading partner networks
To gain new insights from the proliferation of data and increase demand management performance, you’ll increasingly need to pool resources with other partner companies in your extended supply chain.
Each company will play a role in this network of suppliers and service providers, sharing people, information and technology. Rather than extracting value from its own asset, your company will gain value and advantage using data, people, technology and services belonging to others. Isolated companies will become weaker in influence in the overall supply chain.
The need to develop multi-enterprise collaborative supply chain infrastructures will define the future of supply chains across global industries. Extracting value from information, assets and people will no longer be based on ownership, but instead on accessibility and usage.
The sharing of supply chain assets will be accelerated by the emergence of digital platforms across manufacturing, warehousing and logistics. Ecosystems as a platform have been emerging for many years.
Cars have evolved to become platforms, for example, delivering a customer experience that draws on a cross-industry ecosystem of partners, from the car manufacturer to companies that specialise in communications, entertainment and navigation.
What’s new about ecosystems today is the infusion of digital connections, combined with the fact that they’re delivering digital products.
Forces such as globalisation, government pressure, network capacity constraints, freight margin reductions and increased outsourcing will drive companies to explore how to become more efficient in using their networks and resources across their ecosystem platforms.
Most companies will need to leverage an asset-light network that enables them to be flexible and timely in a cost-effective manner. Instead of looking internally and only optimising your own assets, connect with an ecosystem of third parties to share assets. This builds more responsive supply chains.
Individual customer orders will be fulfilled by whatever combination of partners meets the demand requirements at the time of execution.
Keep ahead of market forces
A global shift in population growth, wealth and workforce resources requires better demand-sensing and shaping capabilities.
Wealth and demand for products and services will increasingly shift to parts of the world where companies lack mature infrastructure in terms of sales, supply and recruitment. It’s likely we’ll see a large increase in purchasing power in less-developed countries in the coming decades.
These shifts in economic power will change demand and potentially how customers will buy. Will they want value products, or will demand for more choice and for premium products increase? Will they buy in urban stores, rural locations or will most purchases be done online?
Companies that fail to take action will find their existing markets declining in terms of spending power and as older consumers age.
Advanced analytics technologies – spanning predictive and prescriptive analytics – are playing an important role in helping companies to keep ahead of these market forces. The impact on supply chains is significant.
Predictive analytics are undoubtedly a powerful competency that enable companies to be proactive and take advantage of a future opportunity, or mitigate or avoid a future adverse event.
Prescriptive analytics on the other hand can improve decision making in functional areas like supply chain planning, sourcing, logistics and transportation. More importantly, prescriptive analytics can be deployed to improve the supply chain performance by recommending course of action that best manages trade-offs among conflicting functional goals.
Tom Enright is a VP analyst at Gartner, specialising in supply chain strategies and operations across the retail sector. His focus areas include distributed order management, in-store logistics and last-mile fulfilment. For more information visit www.gartner.com/supplychain.

VIC commits to Inland Rail freight corridor

The Victorian Government has signed up to the Inland Rail Project, a direct rail freight connection between Melbourne and Brisbane hoped to jump-start the state’s Regional Rail Revival program.
Victoria is the first state to officially commit to the Inland Rail Project, signing a bilateral agreement with the Federal Government. This pledges them to a long-term lease with the Australian Rail Track Corporation and supports the extension of the northeast inland rail corridor, in addition to changes to the North East Rail Line. This development will allow for the moving of double-stacked freight containers between Melbourne and Brisbane and is expected to return $16 billion to the national economy.
Deputy Prime Minister and Minister for Infrastructure and Transport Michael McCormack said it was a positive step forward on a project that will create both jobs and investment opportunities throughout regional Victoria.
“I’m pleased to reach agreement with Victoria, the first state to get behind Inland Rail which will improve freight travel times for local farmers and producers and support thousands of jobs,” said the Deputy Prime Minister. “Once complete, Inland Rail will create thousands of jobs nationwide and return $16 billion to the national economy during the delivery phase and in the first 50 years of operation.”
While Inland Rail is a freight project, it will also extend benefits to passengers, releasing funds for much-needed upgrades via the Victorian Regional Rail Revival program.
Victorian Minister for Public Transport and Major Projects Jacinta Allan thanked the Deputy Prime Minister for “acting quickly, so we can now get on with the job of upgrading track, stations and signalling throughout regional Victoria, to run modern trains and get people home sooner.”

Caltex looks to the sun in outback diesel supply world-first

Supply 24-hour access to diesel in remote parts of Western Australia's Pilbara region has become much more feasible with the construction of what is believed to be the world's fully-transportable solar-powered retail fuel outlets. 

Caltex Australia's sites at Tom Price and Onslow, both more than 1300km from Perth, are not connected to mains power, instead relying on the abundant solar energy of the region and on-site battery storage technology.

The Australian company is pioneering the environmentally-friendly initiative to further extend the reach of its National Truck Network -the largest truck refuelling network in Australia, comprising 200 dedicated truck stops and 300 truck-friendly sites across the country.

Caltex Network Development Manager for Western Australia Leon Calvetti said diesel customers  d-driving between remote locations across the state were benefitting from the availability of the  fuel whenever they needed it.

“The biggest challenge of supplying fuel in remote parts of Australia isn’t getting fuel there – after all, we have fuel storage at the site and a great logistics team able to make regular deliveries,” Mr Calvetti said.

“The obstacle is powering the pumps so the fuel can get into the customer’s tank – it’s very expensive and inefficient to run a generator when there are only a handful of customers every day.

“It’s also difficult to locate staff in the middle of the Pilbara many hours’ drive from the nearest major town.

“By creating what we believe are the world’s first fully solar-powered fuel facilities, we can efficiently provide diesel in some of the most remote locations of Australia.

“The other benefit of these sites will come when, at some stage in the future, there is no longer the same demand in that area – if that happens we can simply relocate the entire facility to a new part of the country, as everything on the site is easily transportable by truck.

“The whole design is tailored to Australian conditions, given the abundant sun and the long distances between service stations.”

Mr Calvetti said that, unlike many fuel outlets in rural Australia, the innovative Caltex sites could offer diesel 24 hours a day via a card payment system.

“These sites offer the same high-quality diesel available elsewhere across our national network and customers can access it at any time,” Mr Calvetti said.

“But in such remote locations, with only a limited number of customers driving past, don’t expect all the typical services available at other Caltex sites.

“While these no-frills facilities won’t provide a pie, a can of soft drink or ice creams, they will help keep drivers of heavy transport and four-wheel-drive vehicles supplied with the diesel they need to get to the next town for a well-earned rest.”

Partner with Defence

The Australian Defence Force (ADF) wishes to establish a database of companies that have the necessary skills and resources to assist in times of disaster, such as the recent Cyclones in Queensland and the Asian Tsunami.

From the September 2007 Defence-initiated "Reconstruction During Conflict" seminar, an engagement outcome has been promulgated for the establishment of a ‘Whole of Nation Engineering’ disrupted state rapid reaction reconstruction team capability for the ADF and Australian industry, academia and professional bodies.

These programs may necessitate a partial or total reconstruction program indicatively covering infrastructure (sanitation, potable water, power, heating), accommodation (housing, medical, educational, governmental / community facilities) and innovative entrepreneurial programs to overcome the employment issue of indigenous persons and the associated self esteem and attitudinal slippage.

As ADF engineers provide a primary role in emergency reconstruction there are Australian enterprises with remote area / difficult terrain contracting, specialised material expertise and rapid deployment capabilities willing to support national or international reconstruction operations to facilitate an all facets, total reconstruction project capability. The Australian Industry & Defence Network (AIDN) nationally, with a close working relationship with the Industry Capability Network and all levels of Australian Government is initiating a database of specifically identified Australian enterprise expertise covering capability, product/service supply experience and mobilisation preparedness.   

The proposal

That AIDN members and other enterprises with remote area/difficult terrain (re)construction project experience be invited to:

– Nominate for membership of a Disrupted States Reconstruction Team Support Database;

– participate in a workshop in each State and Territory to identify potential reconstruction requirements and to participate in the formulation a strategic plan for ‘on demand mobilisation’ covering the defence purchasing of strategic plan identified materials, the supply and centralisation of such materials for delivery to the designated reconstruction area of operation (AO) and the mobilisation of designated specialist employees to support the project in-field;

– consider the issues of civilian employees working in designated conflict AO’s and their potential training for working as contractors in a location alongside the ADF under rules of engagement;

– consider supplementary type training (eg – Defence Reserve Support Council Executive Stretch Weekend for enterprise nominated executives with an a degree of physical fitness) so as to understand field and military supply chain methodologies / issues;

– regularly update enterprise capabilities, products or services to ensure database currency.


To provide Defence with –

– An identified industry immediate response support mechanism based upon an agreed Defence and industry involvement plan nominating the intended commitment of each industry member and the offered specialised support capability/ies and indicative associated costs, with annual validation requirements to overlay specific reconstruction demands relevant to potential crisis scenarios.

– A database listing Australian expertise, materials and services prepared to meet a requirement or surge demand reconstruction program for the rehabilitation of a society which may require working in a designated conflict AO.

For further information please contact:

Mike Turner

National President

Australian industry & Defence Network (AIDN)

Office: 03-6382-1844

Mob:    0418-591-479

Email: president@aidn.org.au



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