What characterizes demand-driven supply chains?

Demand-driven supply chains are characterized by their responsiveness to actual customer demand. This approach enables businesses to align their production and inventory levels closely with the preferences and purchasing behavior of customers. By focusing on real-time data, these supply chains can adjust to fluctuations in demand, enabling more flexible and efficient operations.

This responsiveness allows organizations to minimize excess inventory, reduce waste, and improve customer satisfaction by ensuring that products are available when customers want them. In contrast, relying primarily on historical data and forecasts, as mentioned in one of the other choices, can lead to mismatches between supply and actual consumer demand, resulting in either overproduction or stockouts.

Moreover, while reducing costs and establishing long-term contracts with suppliers are important aspects of supply chain management, they do not specifically define a demand-driven approach. Instead, those strategies might be part of broader cost management or supplier relationship initiatives but do not emphasize the direct connection to current consumer behavior as a demand-driven supply chain does.