Demand Management and Specifications/SOW’s
Demand management is the process of using UNIT and RATE consumption levels to forecast and estimate future consumption in an internal functional customer, and providing guidance and input on how to optimize usage and educating the user on the tradeoffs. Demand management activities may involve, (but are not limited to):
• Optimization of sourcing strategies based on how much the team projects they will be buying
• Proactively setting policies, procedures and measurement systems that throttle the consumption and total expenditures of a unit of category of spend.
• Ensuring appropriate levels of capacity in the supply base required to minimize risk.
• Establishing a fixed set of standards to limit options, and restricting the supply base to include only preferred suppliers who comply with risk and compliance requirements.
The authority to review material specifications (and for services, a statement of work) is also within purchasing’s span of control in managing demand, although internal stakeholders sometimes disputes this right. Purchasing personnel work hard to develop knowledge and expertise about a wide variety of materials and services but must also make this knowledge work to an organization’s benefit. The right to question allows purchasing to review specifications where required. In the case of services, it also allows purchasing to ensure that the work being performed is correctly documented and performed. For example, purchasing may question whether a lower-cost material can still meet an engineer’s stress tolerances. They may also question the rate at which a consultant or maintenance provider is charging for a specific project or activity, and revise the work statement accordingly. A review of different requisitions may also reveal that different users actually require the same material or services. By combining purchase requirements, purchasing can often achieve a lower total cost.