Exam 3 Outline SCM 303
Demand Planning: Forecasting and demand management\
the combined process of forecasting and managing customer demands to
create a planned pattern of demand that meets the firm’s operational and financial goals.
Fluctuating customer demand cause operational inefficiencies, such as: Need for extra capacity
resources, backlog, customer dissatisfaction, system buffering(safety stock, safety lead time,
capacity cushions, etc.)
3 basics tactics to influence demand
- influence the timing or quantity
of demand through pricing changes or promotions. Managing the timing of order fulfillment.
Encourage customers to shift their orders from one product to another, or from one service
provider to another.
Improving planning management-
improving info accuracy and timeliness, reducing lead time,
redesigning the product: manufacturing postponement,
- logistics (geographic)
postponement, variable assignment.
Collaborating and sharing information
a decision process in which managers predict demand and make
operational plans accordingly
a proactive approach in which managers attempt to influence either the
pattern or consistency of demand.
a consistent horizontal stream of demands
Seasonality and cycles-
regular demand patterns of repeating highs and lows.
the general sloping tendency of demand, either upward or downward, in a linear or
Shift or step change-
a onetime change in demand, usually due to some external influence on
the correlation of current demand values with past demand values.
the difference between a forecast and the actual demand.
measures how closely the forecast aligns with the observations over time.
Every error, whether positive or negative, reduces forecast accuracy.
indicates the tendency of a forecasting technique to over or under predict
Strategic level planning-
generates long term forecasts of demand(more than one year into the
future), that are used to make grand technology or facility plans
generates forecasts of demand for product families or for particular
geographic locations in order to facilitate intermediate (6to 18months ) capacity and resource
Detailed operational forecasts-
used to do short term (daily or weekly ) product scheduling
different forecasts for different purposes, forecasting, while inherently flawed, is
critical to the success of every firm.
Central Premise: for every event, there is some leading
indicator, the trick is to find that indicator
Designing a forecasting process-
Most common approaches to forecasting of qualitative judgement based forecasting
a technique that seeks inputs from people who are in close contact with
customers and products.