Demand Management

Dr. Ron LembkeSCM 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 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? Somebody decides

Independent vs. Dependent Demand Feeding manufacturing, demand for parts is

dependent on manufacturing plan Sales to customers are independent of our

(production) activities. # snowboards # tops depends on # boards to be made

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

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?

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

Combinations: 31 ice cream * 4 sauces * 12 sprinkles = 1,488

Homework Figure out the total number of combinations

of some (one) thing you like to eat or drink: Go there, write up # of options, and spell it

all out for me, how many there are # lattes: soy, decaf, etc. Ice cream Pizza Beer samplers Burritos Burgers

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 – wedding dinner

Significant design element in order creation

Don’t know possibilities of what customers might buy

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? What kinds of capacity do we need in

each?

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, 2.6Resource Planning

Master Production Scheduling

Sales and Operations Planning

Demand Management

Information Use Make to Knowledge

Use EDI, POS data to know what your customers are going to be ordering

(Not forecasting) Wal-Mart and Philips Forecast based on:

Sales? Demand? Shipments?

Forecasting Framework Fig. 2.7, p. 30

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.

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

PredictingDemand

Shared components

GrandPrix

GrandAm

GrandPrix

End of Pontiac

Last American-produced Pontiac G6 – Nov. 25, 2009

Canadian market-G3 Wave, GM Daewoo, S. Korea, Dec. 2009