Demand chain

The demand chain is that part of the value chain which drives demand.

Analysing the firm's activities as a linked chain is a tried and tested way of revealing value creation opportunities. The business economist Michael Porter of Harvard Business School pioneered this value chain approach: "the value chain disaggregates the firm into its strategically relevant activities in order to understand the costs and existing potential sources of differentiation". It is the micro mechanism at the level of the firm that equalizes supply and demand at the macro market level.

Early applications in distribution, manufacturing and purchasing collectively gave rise to a subject known as the supply chain. Old supply chains have been transformed into faster, cheaper and more reliable modern supply chains as a result of investment in information technology, cost-analysis and process-analysis.

Marketing, sales and service are the other half of the value-chain, which collectively drive and sustain demand, and are known as the Demand Chain. Progress in transforming the demand side of business is behind the supply side, but there is growing interest today in transforming demand chains.

Without marketing / supply chain management (SCM) cross-functional collaboration, firms cannot be expected to respond optimally and promptly to customers' requirements.

At present, there appear to be four main challenges to progress in transforming Demand Chains and making them faster, leaner and better:

The challenge of improving the link between demand and supply has occupied many supply chain specialists in recent years; and concepts such as "demand-driven supply chains", and customer-driven supply chains have attracted attention and have become the subject of conferences and seminars.

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Wikipedia