Demand Management

Definition - What does Demand Management mean?

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.

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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.