Demand Management

Dr. Ron Tibben-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?

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

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

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

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

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?

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

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

2006 Solstice

MSRP around $20,000

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

Euro Plugs No standardized

power supplies for Europe

Different power supply for every country.

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

Delayed Customization

Production Storage Shipping Storage

Before

After

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?