Session 2: Demand Management
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What are the four Ps?
What are three important business processes that relate to demand management?
- marketing management
- demand planning, such as forecasting and customer orders
Why is proper demand management strategically important?
Because it facilitates the planning and use of resources throughout the supply chain.
Customer relationship management helps by customers providing what 3 examples?
- design assistance
- customer needs
- information and communications
What 4 things does order management enable as CRM activity?
- fast and accurate order entry and tracking
- meeting promised delivery dates and quantities
- handling customer inquiries and service complaints, returns and repair
- accurate and timely shipping documentation, invoicing, and recording of sales history
What 2 forms does demand planning deal with Demand?
- management of orders
what are 5 sources of demand?
- Customer orders
- Replenishment orders from distribution centers
- Interplant transfers
- Other sources of demand
What are 3 key influences on demand forecasting?
- Independent versus dependent demand
- Sources of Demand
- Demand patterns
What are four basic demand patterns, or components?
What is forecasted in business planning.
Sales volume (4); new market and supply chain initiatives.
What is forecasted in sales and operations planning?
Physical units of production at the product family level.
What is forecasted in master scheduling?
Physical units of production at the end item level.
Demand forecasts support planning at what three levels?
- business planning
- sales and operations planning
- master scheduling
Why must every forecast include an estimate of error?
Because the error can be used to determine the level of safety stock.
What benefit does shortened lead time have on forecasting?
Companies that shorten their production lead times can better react to short-term demand forecast data.
What are the 3 principles of data collection and preparation?
- Record data in terms needed for the forecast
- Record circumstances relating to the data
- Record demand separately for different customer groups
What are the 2 forecasting techniques?
Qualitative and Quantitative
Qualitative forecasting is based on what?
Quantitative forecasting is based on what?
What are the two types of leading indicators of extrinsic quantitative techniques?
Qualitative techniques are good for what type of planning?
General business trends and medium- to long-range planning.
What are extrinsic techniques based on?
The idea of correlation and cause and effect of outside data.
What are 2 examples of intrinsic quantitative techniques?
- moving averages
- exponential smoothing
When are moving averages best used?
When demand is stable, there is little trend or seasonality, and demand variations are random.
What are 4 reasons to track the forecast?
- 1) understand why demand differs from the forecast
- 2) plan around error in the future
- 3) improve forecasting methods
- 4) to determine safety stock levels
What are 2 types of forecasting error?
Bias and random variation.
What are 3 actions to take and alternatives to consider for a biased forecast?
- 1) Investigate the cause of the error, such as sales promotions, large one-time orders, etc.
- 2) If necessary, adjust the demand history.
- 3) Change the monthly average forecast.
What is mean absolute deviation? (MAD)
A simple and proven statistical approach to measuring and evaluating forecast error. MAD is used to determine the dispertion of the forecast error around average demand.
Why are measurements such as MAD important?
Because they indicate the relative cost of different levels of customer service.
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