Session 7, Demand Management & Production Planning

PreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain1ThoughtofthedayLatinmottoes“Whereareyougoing?”PreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain2Sessionno.7DemandManagement&ProductionplanningPreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain3Introduction•Learningoutcome•Attheendofthissessionyouwillbeabletorecognizebasicdemandpattern,describethebasicprincipleofforecastingandexplaintherelationshipamongproductionplanning,masterplanning,materialrequirementsplanning,andcapacityplanning•Topics•Demandandforecasting•Masterplanning•Materialrequirementsplanning•CapacityplanningPreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain4Demand•DemandSales•Demand:theamountpeoplewanttobuyatagivenprice•Sales:theamountpeoplebought•Characteristicsofdemand•Trend•Seasonality•Randomvariation•Cyclicalvariation•Demandpatterns•Stableversusdynamic•DependentversusindependenttdPreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain5DemandManagementImportanceChanelOrderProductionEndcustomerdemandPreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain6Forecasting•Anestimateoffuturedemand•Principleofforecasting•Forecastsarealwayswrong•Everyforecastshouldincludeandestimateoferror•Forecastsaremoreaccurateforgroupsofproducts•ForecastsaremoreaccuratefornearerperiodsoftimePreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain7ForecastingTechniques•Qualitative–subjective–basedonintuitionandinformedopinion•Quantitative–mathematical–basedonhistoricaldata(Timeseriesanalysis)•Movingaverages/Exponentialsmoothing/Regressionanalysis•Extrinsic–causal–basedoncauseandeffect•Simulation–imitation-combinationapplicationofquantitative&causalmethodsPreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain8SCForecastingSteps•Understandtheforecastingobjectives•Integratedemandplanning&forecasting•Identifythemajoraffectingfactors•Understandandidentifycustomersegments•Determintheapproprivateforecastingtechnique•EstablishperformanceanderrormeasuresfortheforecastPreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain9MovingAverages•Simplemovingaverage•WeightedmovingaveragekXpXpXpXXkttktktt1111_1~...1~11tttXXekXXXXXkttttt11_1~...1~11tttXXePreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain10MovingAverages•ExampleMonthDemandThreeMonthTotalNextMonthForecast1100210539530041103101005902951046100300997110300100PreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain11TrackingtheForecast•MethodofmeasuringforecastaccuracyMonthActualDemandForecastVariationAbsolutedeviation4110100+1010590104-1424610099+1257110100+1035Total410403+7MAD=AbsolutedeviationNumberofobservations=354=8.75PreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain12ExponentialSmoothingtttXaaXX~1~)1(PreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain13RegressionAnalysis•Analysistherelationshipbetweentwoormorevariable.•Evaluteregressionequationparameters•UsingregressionequationtoforecastPreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain14CollaborativePlanning,Forecasting,andReplenishment(CPFR)•Sharingofconsumerpurchasingdataamongandbetweentradingpartnerstogovernsupplychainactivities•Directlinkbetweentheconsumerandthesupplychain–InternetbasedtechnologyPreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain15MasterPlanning•PlanninghierarchyBusinessPlanProductionPlanMaterProductionScheduleMaterialRequirementsPlanProductionActivityControlPlanningExecutionS&OPPreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain16ProductionPlan•Familiesorgroupsofproducts•Timehorizon–moreorlessthan12months•Strategies•Chase•Level•Hybrid(S&OP)•Seniormanagementdecision-makingprocess•Onamonthlybasisevaluatesrevised,time-phasedprojectionsofsupply,demand,andtheresultingfinancials•Ensuresthatthetacticalplansinallbusinessfunctionsarealignedandsupportthebusinessplan.PreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain19MasterProductionSchedule(MPS)•Requirementsforindividualenditemsbydateandquantity–disaggregatetheproductionplan•Objectives•Maintainthedesiredlevelofcustomerservice•Bestuseofresources•KeepinventoriesatthedesiredlevelPreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain20MPS-ExamplePeriod123456Forecast200600500300400500Projectedavailablebalance3001005000700300800MPS100010001000Lotsize1000Leadtime1periodPreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain21MaterialRequirementsPlanning(MRP)•Calculaterequirementsfordependentdemanditems:what,howmuchandwhenisrequired•ItisdrivenbyMasterProductionSchedulePreparedbyZlatkoMuhvicMKTG-7217L,ManagetheSupplyChain22BillsofMaterial•Listallcomponentsneededtomakeaproduct•Parent-componentrela