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Demand Management

Demand Management. Dr. Ron Tibben-Lembke SCM 461. Role of Demand Management. Collect information from all demand sources Customers Spare parts Negotiate and Confirm shipping dates, quantities Confirm order status, communicate changes. Different Environments.

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Demand Management

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  1. Demand Management Dr. Ron Tibben-Lembke SCM 461

  2. Role of Demand Management • Collect information from all demand sources • Customers • Spare parts • Negotiate and Confirm shipping dates, quantities • Confirm order status, communicate changes

  3. Different Environments • Factory to customers – plant very aware of customer needs • Factory to DC – stable replenishment plan • Plan vs. Forecast: • Forecast is what you think demand will be like • Plan is how you will respond to demand • “A manager cannot be held responsible for not getting a forecast right.” • How are you going to respond to changes in demand? • You have control over the plan and execution, not demand • Rain forecasted? You decide to bring umbrella or not. • Planning a BBQ: 300 people? 500?

  4. Independent vs. Dependent Demand • Feeding manufacturing, demand for parts is dependent on manufacturing plan • Sales to customers are independent of our (production) activities. • Customer order decoupling point: when control of timing passes from customer to us • Make to stock – Finished goods • Assemble to Order – WIP • Make to Order – Raw Materials • Engineer to Order - suppliers

  5. Make to Stock • Customers buy finished, generic product • McDonalds’ heat lamp days • Triggers signal to make more • Use warehouses, DCs to fulfill demand • Maybe VMI? • Tradeoff of more flexible manufacturing, faster response, for less inventory

  6. Assemble to Order • Define customer’s order in terms of alternative components and options • Subway, In-N-Out • Configuration management: combine options properly into a buildable final product • Flexibility in combining components, options, and modules • Movement from MTS to ATO – less inventory, fresher product, better sales • Combinations: • 31 ice cream * 4 sauces * 12 sprinkles = 1,488

  7. Make/Engineer to Order • No stock components to assemble • Cooking at home – could make any of the standard things you usually make: burger, pizza, chili, etc., etc. • Include Engineer to Order • Tell me what you’d like – fancy restaurant • Significant design element in order creation • Don’t know possibilities of what customers might buy

  8. What do you think? • Which method is best? • What kinds of uncertainty are involved in each? • What determines customer service in each? • What is the decoupling point in each system?

  9. Communication with Depts. • SOP – give forecasts, get prod. Plans • Capacity: material (MTS), labor (MTO) • Timing of deliveries & production • Master Production Scheduling • Detailed order info to MPS • Status of each order • Figs 2.5, 2.6

  10. Forecasting Framework • Fig. 2.7, p. 30

  11. Aggregating Demand • Long-term, or product-line forecasts more accurate than short term or detailed forecasts • Monthly: Avg = 20, std dev =2 • 95%: 16-24 which is +/- 20% • Annual: Avg = 20 * 12 = 240 • Std. Dev = 2 * sqrt(12) = 6.9 • 95%: 226-254, which is +/- 5.8% • Easier to forecast demand for components than for sales of particular car configurations.

  12. Aggregating Demand • Individual item forecasts must add up to correct total • Individual item percentage of total probably constant • Pyramid forecasting – bring things into alignment • Force people to accept higher targets without “owning” them

  13. PredictingDemand

  14. Shared components Grand Am Grand Prix Grand Prix

  15. 2006 Solstice • MSRP around $20,000

  16. HP Inkjet Printers • Printers made in Vancouver, sent via ship through Panama Canal to Europe • Europe warehouse stocks inventory by country • physically different-- power supply • manuals different languages • Substitution not allowed • Re-supply time very long

  17. Euro Plugs • No standardized power supplies for Europe • Different power supply for every country.

  18. HP Inkjet Printers • Redesigned printers so that power supply added in Europe • Re-engineer product, power supply • Assembly done in a warehouse (Quality?) • Manuals added in Europe • Many expensive changes • Store ‘vanilla’ boxes • Postpone point of differentiation

  19. Delayed Customization Production Storage Shipping Storage Before After

  20. Benetton • Benetton sweaters made of undyed wool, dyed once demand is known • Dyeing LT much faster than production • How many undyed sweaters to make? • How many Red, Green, Blue, also, if this production process is cheaper, and you know you’ll sell some minimum amount?

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