Managing Demand Variability by Distinguishing between Internal and External Variability : Investigating the Requirements for Managing Demand through Demand Shaping in B2B Companies

Abstract: Due to the increasingly uncertain environments that global supply chains operate within, both due to component shortages and other types of challenges, the possibility of managing demand variability and balancing it with supply capabilities is getting more challenging. The primary way to deal with these fluctuations in demand is by building flexibility in the supply chain to meet the variations that occur and keep the customers satisfied. However, when flexibility is not enough, and the supply chain becomes increasingly strained due to geopolitical factors and customers demanding higher customizations, more efforts are required to manage the variability. This study investigates the possibility that instead of relying solely on flexibility, try to deal with the variations that arise in demand. This relates both to internal processes that increase variation but also to the variations that are caused by actual changes in demand. The study partly examines what drives internal variation and how one should work to minimize it. Moreover, concerning the external variation, demand shaping theory is applied. This is to understand how external variation can be handled by trying to steer the demand. As the theory in previous studies has primarily been applied in B2C contexts, the applicability of the theory in a B2B context is also examined. Furthermore, the study also investigates how demand and supply should be integrated to utilize the concepts in the best way possible when managing demand variability. The study has been conducted through a case study at Ericsson, where people who work within sales and supply have participated and contributed with their knowledge. The results show the importance of integration between different functions to succeed in managing demand variations and having a more significant impact on what customers buy. This means both clear communication, internally and externally, and the importance of having a unified vision and incentives that drive the company towards the same goal. In addition, the results also show that although the academic literature is mainly aimed at B2C companies, it is possible to apply the concept to B2B companies as well.