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Demand management is a unified method of controlling and tracking business unit requirements and internal purchasing operations. It helps organizations remain engaged in their supplier relationships and related advantages. Organizations use demand management systems to address external spending factors, arrange purchase orders and eradicate waste.
Demand management focuses on the volume of products that are purchased from providers, rather than individual product pricing, in contrast to conventional sourcing initiatives.
Demand management is also known as consumption management or strategic spend management.
Techopedia Explains Demand Management
Demand management begins with an in-depth perception of existing business requirements, historical buying behavior and expected requirement for the service or product sourced by an organization. This research includes an assessment of purchase orders, service or product specifications and strategic business plans.
Demand management helps streamline purchasing techniques. When applying demand management, key considerations include:
- Available options for volume discounts
- Order timing’s impact on pricing
- Whether or not the best suppliers are being utilized
- Precise attention to described contract processes
Building overall performance measures and essential performance indicators is vital to keeping track of demand and potential intervention. The accumulated data can result in better demand forecasts, which may be incorporated with an extensive supplier-communications program. These details help suppliers handle assets more effectively, which reduces expenditures.
Advantages of demand management are as follows:
- Screens the growth and decline of the quantity of transactions between suppliers
- Monitors all related expenditures
- Illustrates the reasoning behind continuing to strengthen supplier relationships – internally and externally
Demand management is developing into a widely accepted strategy preferred across a variety of organizations and sectors, like telecom and financial institutions, etc. Many organizations that use demand management to target indirect spent sections also use the approach for more complicated spent categories, such as travel, direct materials and technology.
