1. Supply Chain Management Principles
LB I: Demand Planning

2. LB Objectives Explain Integrated Business Management
Explain how demand shaping is used to manage demand
Distinguish between qualitative and quantitative methods of forecasting
Categorize the different types of demand patterns
Identify causes of the bullwhip effect upon the supply chain
Discuss MRP, CRP, DRP, ERP, CPFR
LO1

3. Supply Chain Focus Products Information
Funds – all of which move from:
Suppliers Distribution
Retailers Customers
Reverse Logistics
LO2

4. Integrated Business Plan
Based on strategies, mission and vision
Business plan drives the demand & supply plan
LO1

5. Demand Management
Demand management is the process through which manufacturers recognize demand through forecasting and customer orders
It can also shape demand through marketing & sales strategies
Supply plan adheres to the agreed-upon demand plan and delivers the targeted revenue, profitability, and cash flow objectives
LO1

6. Balancing Supply with Demand
When demand is greater than supply, business is lost and may never be recaptured
When supply is greater than demand, prices decrease, companies might have funds tied up in inventory, and risk products becoming obsolete
LO2

7. Improving balance between supply and demand
Internal balance – Varying how much is produced and how much is stored in inventory (flexible production processes)
External balance – use of price and lead time – aka Demand Shaping
LO2

8. Collaborative Planning Process
Demand planning is a collaborative process that strives to achieve consensus
It is personnel working together to achieve agreed-upon outcome
CPFR – Collaborative Planning Forecasting & Replenishment
LO3

9. Collaborative Planning Process
CPFR is a process that shares visibility, information and resources that facilitates planning to satisfy customers
LO1

10. Collaborative Planning
Process is driven by demand forecast based on data from business intelligence provided by sales, marketing, and management
S&OP – Sales and Operations Planning helps develop input for the forecast
MRP – Materials Requirements Planning – What should be procured from suppliers
MPS – Master Production Schedule – Which products to make and when to make them
LO5

11. Demand Forecast
A high-level comprehensive plan by senior management with marketing and sales input and is shaped by anticipated customer demand.
It incorporates vision and expectations for shareholder value, revenues, market share and profitability
LO5

12. Demand Plan
Demand forecast enables the creation of the demand plan which more accurately defines resource requirements such as:
Facilities
Equipment
Materials
Employees
MRP & MPS define specific raw materials and semi-finished goods that are necessary for manufacturing and distribution to achieve targeted revenue, profitability and cash flow objectives

13. Demand Forecasting Methods
Quantitative Forecasting – Use of historical data
Qualitative Forecasting – Use of intuition or expert judgement such as for new products or products that change frequently

14. Demand Forecasting Methods
External inputs – Current and new customers, competition and industry-specific outlook
Internal inputs – Pricing and special promotions planned and the existence of any new product launches

15. Types of Demand Patterns
Stationary patterns – Steady, even demand with little fluctuation
Random patterns – Exhibit changes and variances that are not predictable
Trend – Predictable
Seasonal – Increase and decline that repeat cycle after cycle
Cyclical – Influenced by external factors such as broader economy or changes in customer preferences

16. Challenges of Demand Planning
Receiving customer data on a timely basis
Determining demand for new products
Note that forecasting is almost NEVER perfect
Forecast errors calculated should be shared with all stakeholders
Long range forecasts – Greater degree of error
Short term forecasts – Less uncertainty and more accurate because of known market conditions

17. Independent and Dependent Demand
Independent Demand – Finished goods sold by a company which are derived outside the company and created by customers
Dependent – Created by sale of finished goods such as demand for components required to complete a product e.g. demand for tires, seats…
MRP – Materials Requirement Planning software e.g. Oracle, SAP and i-2.
MRP is driven by the demand plan and MPS

18. ERP Functions
MRP and MPS are integrated into the ERP which makes forecasting and planning data available to all
LO1