Demand Chain vs. Supply Chain In The New Net Economy

Defining The Next Generation In Fulfillment
Internet commerce is projected to grow from $51 billion in 1998 to more than $1.4 trillion by 2003, according to Forrester Research. The rapidly rising importance of the Internet as the medium for business-to-business (B2B) and business-to-consumers (B2C) commercial transactions has changed traditional paradigms, establishing a new set of criterion for business success. E-Commerce is heightening competition, boosting customer expectations and triggering dramatic growth in small-parcel deliveries to homes and businesses. Today, Net Economy customers are demanding rapid delivery of the physical products they order via the Internet and instant access to accurate information regarding product delivery status.

Companies competing in the Net Economy must distinguish themselves with superior service, accurate and reliable delivery and real-time information, as the Internet has lowered the cost of switching suppliers. E-Businesses must focus on improving their product assortments, fulfillment execution and inventory visibility with customer loyalty and retention as their key metric. The rise of Internet-based commerce has forced companies to increase the efficiency, velocity and responsiveness of their operations while they also rapidly respond to increased demand and ever changing conditions. As customers, products, and business models continue to evolve, a company's fulfillment solution needs to be real-time, flexible and capable of accommodating new initiatives in order to successfully compete in the Net Economy.

AllPoints Systems, Inc. recognizes that "demand drives supply in the new Net Economy." AllPoints Systems, based in Norwood, MA, is a leading provider of e-Commerce demand chain solutions for the consumer-direct, retail, grocery, pharmaceutical, automotive and electronic industries. Our understanding of the paradigm shifts posed by e-commerce transaction models has led us to a unique view of demand chain as the driver of the Net Economy. Our software disaggregates traditional "supply chain" models by providing solutions that assist in shorter delivery/lead times for customers; lower inventory levels for retailers/distributors; accurate "pull" forecasting and planning for manufactures; elimination of steps (and costs) in the "commerce chain"; and provide total event visibility for increased customer satisfaction. In short, AllPoints Systems is "Delivering Demand Chain Solutions for the Net Economy."

The current prevailing logistics infrastructure places a premium on efficiency, based on a business model of mass production and economies of scale. The rise of the Net Economy is forcing companies to adopt a new fulfillment model that operates with a high degree of velocity, flexibility and customer-responsiveness. The key differences in the traditional Supply Chain vs. the emerging Demand Chain end-to-end fulfillment models are illustrated in the following table:
Traditional SCE/WMS Model New Fulfillment Model
One size fits all; all customers are handled the same way. Fulfillments are performed on a customer-by-customer basis (make to order, JIT and in-transit merge are critical).
The ability to allocate an order is based on physical inventory only and requires inventory carrying costs or "flow through" collaboration from all trading partners to be advantageous. Virtual inventory, merged with physical inventory, is used to reduce overall costs and increase inventory turns.
Orders are typically large and palletized, with truckload and less-than-truckload (LTL) shipments. Accuracy levels of 99.9% of orders is just good enough. Orders contain more line items but for smaller quantities and require piece picks with UPC/NDC/ISBN scanning or voice recognition of the product identifier for 100% picking accuracy is critical.
Customer demand for products is stable and consistent requiring few last minute changes. Customer demand is fragmented and sporadic with many last minute changes.
Push distribution with few returns. Two-way product flow with frequent returns.
Distribution is typically based on forecasts and open POs and utilizes a push-oriented event into the supply chain. Customer demand is pull-oriented with demand fulfilled from actual orders thus a demand chain approach.
Customer order shipping destinations are concentrated and standard. Customer shipping is highly dispersed with ship-from and ship-to locations varying on an order-by-order basis, which is typically frequent, small parcel delivery.
Scanning of product bar codes or UCC128 license plates and use of RF devices is considered high tech, but requires multiple training aids and multilingual support within the application and screen layouts. Utilization of wireless devices and contiguous Voice Recognition is quicker then scanning and promotes a diverse work force as language independence is reality.

Traditional Supply Chain Planning Model Net Economy Planning Model
Plans are based on prior year seasonal sales, expected inventory levels, promotions and expected increases. Plans are based on sales activities, promotions, real-time inventory levels, seasonality, and aggregate demand.
Purchases and the delivery of goods are based on open-to-buy and assortment plans. Purchases and the delivery of goods are based on real-time inventory levels and visibility of goods throughout the demand chain.
Monitoring Open-to-Buy based on forecasts, sales and inventory levels across all selling and stocking locations. Monitoring the delivery of goods based on real-time inventory levels across all stocking locations and daily sales volume based on position on the Web site.

Many of the current fulfillment and supply chain systems have been built according to the traditional business models and lack the responsive end-to-end fulfillment capabilities required by companies responding to the demands of the Net Economy. Most importantly, "old economy" fulfillment systems often have an inadequate architecture for scalability and configurability and can't handle large order volumes and cross enterprise connectivity.

In the Net Economy, the demand chain-based e-Fulfillment model compresses time, is pull-oriented from the consumer and is based on real-time event monitoring, inventory positions and most importantly, information for forecasting and planning. The initiative and focus has shifted from the manufacturer to the end consumer. Customer-oriented fulfillment, demand planning, pull distribution and visibility are paramount! Businesses intending to succeed in the Net Economy need to understand and respond to these issues by incorporating demand chain solutions into their e-Commerce model. AllPoints Systems has provided these solutions to leading e-Businesses, elevating them in their marketplaces. With specific solution sets designed for some of the most challenging vertical markets, AllPoints Systems can deliver the end-to-end demand chain system to make an immediate impact on the success of B2B and B2C e-Business models. For more information please contact AllPoints Systems, Inc. by visiting, call 781-501-2600 or e-mail at

By Bruce E Welty, Founder, AllPoints Systems, Inc.