1. Manufacturing Planning and Control
MPC 6th Edition
Chapter 2

2. Demand Management
The Demand Management (DM) process determines how a firm integrates information from customers (both internal and external) into the MPC system. Activities include demand determination, converting customer orders into delivery promises, and balancing supply with demand.

3. Shaping DM to match the manufacturing environment
Agenda
What is DM?
Benefits of DM
Role of DM
Shaping DM to match the manufacturing environment
Information and DM
Day-to-Day DM
Principles

4. Demand Management in MPC
Demand management provides a link to
The marketplace
Sister plants
Warehouses
Other internal and external customers
Demand management functions
Information gathering
Communicating with customers
Identifying all sources of demand

5. Demand Management in the MPC System
Marketplace (customers and other demand sources
Sales and operations planning
Resource Planning
Demand management
MPC Boundary
Master production scheduling
FRONT END

6. Planning and Control
Demand management coordinates demand quantities and timing with the planning and control activities of the company
Planning occurs mainly in the SOP module
Control determines how capacity will be converted into products

7. Execution
The company executes the plan as actual demand information becomes available
The control function determines how the plans will be modified to accommodate forecast errors and other changes in assumptions
Most control functions are located in the MPS module

8. Forecasts are estimates of what might occur in the marketplace
Forecast versus Plan
Forecasts are estimates of what might occur in the marketplace
Plans specify how the firm will respond to these forecasts
The plan may look significantly different from the forecast–because of other considerations (staffing, capacity, etc.)
Managers can’t be held responsible for forecast errors, but should be held responsible for failing to execute the plan

9. Independent versus Dependent Demand
The source of demand determines its type
Independent – Customer demand that is not directly influenced by the actions of the firm (e.g. customer orders)
Dependent – Demand that is driven by the plans and activities of the firm (e.g. components, warehouse demand)

10. Demand Management and MPC Environment
DM must conform to the strategy of the firm, capabilities of manufacturing, and needs of customers
These define the MPC environment
MPC environment is defined by customer order decoupling point
The point where demand changes from independent to dependent
Alternatively, order penetration point

11. Make-to-Stock
Customer demand is filled from finished goods inventory (cosmetics, grocery items)
Key focus of demand management is maintenance of finished goods inventories
Physical distribution is a key concern

12. Assemble-to-Order
Customer requirements are met by a combination of standard options (personal computers, fast food)
Primary task of demand management is to define the customer’s order in terms of components and options (configuration management)

13. Make-to-Order
Items built to customer specifications, starting with raw materials (airplanes)
Primary task of demand management is gathering information about customer needs and coordinating with manufacturing

14. Engineer-to-Order
Firm works with the customer to design the product, then produces the product, starting with raw materials (ships, bridges)
Primary task of demand management is gathering information about customer needs and coordinating with engineering and manufacturing

15. MPC Environments Inventory Location Suppliers Raw materials
Work-in-process
Finished goods
Make-to-Stock
Assemble-to-Order
Make-to-Order
Engineer-to-Order
Independent
Dependent
Decoupling Points
MPC Environment

16. Key Demand Management Tasks by Environment
Make-to-Stock
Assemble-to-Order
Make-to-Order/ Engineer-to-Order
Information
Provide forecasts
Configuration management
Product specifications
Planning
Project inventory levels
Determine delivery dates
Provide engineering capacity
Control
Assure customer service levels
Meet delivery dates
Adjust capacity to customer needs

17. Demand Management Communication Activities
Connection
Make-to-Stock
Assemble-to-Order
Make-to-Order/ Engineer-to-Order
SOP
Demand forecasts
Demand forecasts, product family mix
Demand forecasts, engineering detail
MPS
Actual demand
Mix forecasts, actual demand
Final configuration
Customer(s)
Next inventory replenishment
Configuration issues, delivery date
Design status, delivery date

18. Customer Interactions
Demand management converts customer orders into detailed MPC actions
Make-to-Stock–resupply of inventory
Assemble-to-Order–conversion of customer request to promise date
Make(Engineer)-to-Order–conversion of customer request to product specifications and promise date

19. Information Use in DM
Make-to-Knowledge–replacing forecasts with knowledge of customer requirements
Information channels (EDI, information sharing, etc.) enhance knowledge of customers’ inventory, requirements, and plans

20. Data Capture and Monitoring
Data is needed in two categories
Overall market data–needed for sales and operations planning
Detailed product mix–used for master production scheduling and customer order promising
It is important to capture actual data wherever possible

21. Data Capture and Monitoring Data is needed in two categories
Overall market data–needed for sales and operations planning
Detailed product mix–used for master production scheduling and customer order promising
It is important to capture actual data wherever possible

22. Customer Relationship Management
Make-to-Stock–capturing customer demand can help determine demand and mix trends
Assemble-to-Order/Make-to-Order–customer information can provide information concerning design and mix preferences

23. Outbound Product Flow
Physical distribution of products is planned using information from the demand management function
Short-term transportation schedules are developed using information such as customer delivery promise dates, inventory resupply shipments, interplant shipments, etc.

24. Demand Management Elements
Organization–responsibility for DM activities can be distributed throughout the firm
Flexibility requires rules to avoid conflicts and unintended consequences
Monitoring–data must be accurate, timely, and appropriate
Communication is critical when inputs or outputs change
Balancing supply and demand–intelligence on actual conditions provides the basis for changes to plans

25. Collaborative Planning, Forecasting, and Replenishment (CPFR)
Designed to improve competitiveness by facilitating communication between suppliers and retailers
Goal: reducing variance between supply and demand
Developed by the Voluntary Interindustry Commerce Standards Association

26. CPFR Steps 1
Establish collaborative relationship–may require process redesign 2
Create joint business plan 3
Create sales forecast 4
Identify exceptions to the sales forecast 5
Resolve/collaborate on exception items

27. CPFR Steps 6 Create order forecast 7
Identify exceptions to order forecast 8
Resolve/collaborate on exception items 9
Generate order

28. Principles
Demand management systems and procedures must be in alignment with the market environment
All product resource demands must be identified and accounted for when forecasting
Data capture must include not only sales, but also knowledge, trends, systems performance, and demand management performance

29. Principles
Implementing CPFR can lead to important organizational and business process improvements for both the customer and supplier
The CPFR process can improve customer service, sales, inventory, and margin performance for both the customers and supplier in a supply chain

30. Quiz – Chapter 2
Demand Management (DM) includes which of the following activities?
Forecasting
Product shipping
Entering customer orders
The customer order decoupling point is best defined as ____________
In an Assemble-to-Order environment, the most likely point where customer order decoupling would take place is ______________
Sales and Operations Planning can be completed at which of the following levels
Product Family
Region
Organizational Unit
The main goal of a Collaborative Planning, Forecasting, and Replenishment (CPFR) process is to _________________