chap002 demand

7/22/2019 Chap002 Demand

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Copyri ght 2011 by The McGraw-H il l Companies, Inc. All ri ghts reserved.McGraw-Hill/Irwin

Manufacturing

Planning and Control

MPC 6thEdition

Chapter 2


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Demand Management

The Demand Management (DM)process determines how a firm

integrates information fromcustomers (both internal andexternal) into the MPC system.

Activities include demand

determination, converting customerorders into delivery promises, andbalancing supply with demand.


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Agenda

What is DM?

Benefits of DM

Role of DM

Shaping DM to match the manufacturing environment

Information and DM

Day-to-Day DM

Principles


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Demand Management in the

MPC System

Resource

Planning

Sales and

operations

planning

Demand

management

Master

production

scheduling

Marketplace

(customers

and other

demand

sources

FRONT END

MP

C

Boundary


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Planning and Control

Demand management coordinates

demand quantities and timing with the

planning and control activities of thecompany

Planning occurs mainly in the SOP

module

Control determines how capacity will

be converted into products


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Execution

The company executes the plan as

actual demand information becomes

available The control function determines how

the plans will be modified to

accommodate forecast errors and

other changes in assumptions

Most control functions are located in

the MPS module


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Forecasts are estimates

of what might occur inthe marketplace

Plans specify how the

firm will respond tothese forecasts

The plan may looksignificantly differentfrom the forecastbecause of other

considerations (staffing,capacity, etc.)

Managers cant be heldresponsible for forecast

errors, but should beheld responsible forfailing to execute the

plan

Forecastversus Plan


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Independent versus

Dependent Demand

The source of demand determines its

type

IndependentCustomer demand thatis not directly influenced by the actions

of the firm (e.g. customer orders)

DependentDemand that is driven by

the plans and activities of the firm (e.g.

components, warehouse demand)


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Demand Management and

MPC Environment

DM must conform to the strategy of

the firm, capabilities of manufacturing,

and needs of customers These define the MPC environment

MPC environment is defined by

customer order decoupling point The point where demand changes

from independent to dependent

Alternatively, order penetration point


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Make-to-Stock

Customer demand is filled from

finished goods inventory (cosmetics,

grocery items) Key focus of demand management is

maintenance of finished goods

inventories

Physical distribution is a key concern


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Assemble-to-Order

Customer requirements are met by a

combination of standard options

(personal computers, fast food) Primary task of demand management

is to define the customers order in

terms of components and options

(configuration management)


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Make-to-Order

Items built to customer specifications,

starting with raw materials (airplanes)

Primary task of demand managementis gathering information about

customer needs and coordinating with

manufacturing


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Engineer-to-Order

Firm works with the customer to

design the product, then produces the

product, starting with raw materials(ships, bridges)

Primary task of demand management

is gathering information about

customer needs and coordinating with

engineering and manufacturing


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MPC Environments

SuppliersRaw

materials

Work-in-

process

Finished

goods

Make-

to-Stock

Assemble-

to-Order

Make-

to-Order

Engineer-

to-Order

IndependentDependent




Decoupling

Points

MPC

En

vironment

Inventory Location


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Key Demand Management

Tasks by Environment

Tasks Make-to-Stock Assemble-to-

Order

Make-to-Order/

Engineer-to-

Order

Information Provide

forecasts

Configuration

management

Product

specifications

Planning Project

inventory levels

Determine

delivery dates

Provide

engineering

capacity

Control Assure

customer

service levels

Meet delivery

dates

Adjust capacity

to customer

needs


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Demand Management

Communication Activities

Connection Make-to-Stock Assemble-to-

Order

Make-to-Order/

Engineer-to-

Order

SOP Demand

forecasts

Demand

forecasts,

product family

mix

Demand

forecasts,

engineering

detail

MPS Actual demand Mix forecasts,

actual demand

Final

configuration

Customer(s) Next inventory

replenishment

Configuration

issues, delivery

date

Design status,

delivery date


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Customer Interactions

Demand management converts

customer orders into detailed MPC

actions Make-to-Stockresupply of inventory

Assemble-to-Orderconversion of

customer request to promise date

Make(Engineer)-to-Orderconversion

of customer request to product

specifications and promise date


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Information Use in DM

Make-to-Knowledgereplacing

forecasts with knowledge of customer

requirements Information channels (EDI,

information sharing, etc.) enhance

knowledge of customers inventory,

requirements, and plans


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Data Capture and

Monitoring

Data is needed in two categories

Overall market dataneeded for sales

and operations planning Detailed product mixused for master

production scheduling and customer

order promising

It is important to capture actual data

wherever possible


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Data Capture and

Monitoring

Data is needed in two categories

Overall marketdataneeded for

sales andoperationsplanning

Detailed productmixused formaster production

scheduling andcustomer order

promising

It is importantto captureactual datawhereverpossible


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Customer Relationship

Management

Make-to-Stockcapturing customer

demand can help determine demand

and mix trendsAssemble-to-Order/Make-to-Order

customer information can provide

information concerning design and

mix preferences


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Outbound Product Flow

Physical distribution of products is

planned using information from the

demand management function Short-term transportation schedules

are developed using information such

as customer delivery promise dates,

inventory resupply shipments,

interplant shipments, etc.


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Demand Management

Elements

Organizationresponsibility for DM activities can

be distributed throughout the firm

Flexibility requires rules to avoid conflicts and

unintended consequences

Monitoringdata must be accurate, timely, and

appropriate

Communication is critical when inputs or outputschange

Balancing supply and demandintelligence on

actual conditions provides the basis for changes to

plans


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Collaborative Planning,

Forecasting, and

Replenishment (CPFR)

Designed to improve competitiveness

by facilitating communication betweensuppliers and retailers

Goal: reducing variance between

supply and demand

Developed by the Voluntary

Interindustry Commerce Standards

Association


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CPFR Steps

1 Establish collaborative relationshipmay

require process redesign

2 Create joint business plan

3 Create sales forecast

4 Identify exceptions to the sales forecast

5 Resolve/collaborate on exception items


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CPFR Steps

6 Create order forecast

7 Identify exceptions to order forecast

8

Resolve/collaborate on exceptionitems

9 Generate order


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Principles

Demand management systems and

procedures must be in alignment with

the market environmentAll product resource demands must

be identified and accounted for when

forecasting

Data capture must include not only

sales, but also knowledge, trends,

systems performance, and demand

management performance


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Principles

Implementing CPFR can lead to

important organizational and business

process improvements for both thecustomer and supplier

The CPFR process can improve

customer service, sales, inventory,

and margin performance for both the

customers and supplier in a supply

chain


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QuizChapter 2

Demand Management (DM) includes which of the following activities?

Forecasting

Product shipping

Entering customer orders

The customer order decoupling point is best defined as ____________

In an Assemble-to-Order environment, the most likely point where

customer order decoupling would take place is ______________

Sales and Operations Planning can be completed at which of the

following levels

Product Family

Region

Organizational Unit

The main goal of a Collaborative Planning, Forecasting, and

Replenishment (CPFR) process is to _________________

chap002 demand

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