1. Demand Management
Dr. Ron 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? Somebody decides

4. 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

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?

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

7. 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

8. 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

9. 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?

10. 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
Resource Planning
Master Production Scheduling
Sales and Operations Planning
Demand Management

11. Information Use Make to Knowledge Wal-Mart and Philips
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?

12. Forecasting Framework
Fig. 2.7, p. 30

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

14. 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

15. Predicting Demand

16. Shared components
Grand
Prix
Grand Am
Grand
Prix

17. End of Pontiac Last American-produced Pontiac G6 – Nov. 25, 2009
Canadian market-G3 Wave, GM Daewoo, S. Korea, Dec. 2009