Chapter 12 - Chapter 12 Demand Planning Forecasting and...

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Chapter 12: Demand Planning: Forecasting and Demand Management DEMAND PLANNING: AN OVERVIEW In order to develop demand estimates, nearly every company has to forecast the quantity and timing of demands, and many companies can also influence or “manage” customers’ demand patterns through the product prices that they set and through other means Demand Planning- is 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 Demand Forecasting- is a decision process in which managers predict demand and make operational plans accordingly Demand Management- the other part of demand planning, is a proactive approach in which managers attempt to influence either the pattern or consistency of demand Planning Activities Forecasting activities integrate information gathered from the market, from internal operations, and from the larger business environment in order to make predictions about future demand o Look at Table 12-1 pg 343 DEMAND FORECASTING Stable Pattern- is a consistent horizontal stream of demands Seasonality and Cycles- are regular patterns of repeating highs and lows. o Seasonality may be daily, weekly, monthly, or even longer o Economic, political, demographic, and technological factors influence these patterns Trend- identifies the general sloping tendency of demand, either upward or downward, in a linear or nonlinear fashion Shift or Step Change- in demand is a one-time change, usually due to some external influence on demand Autocorrelation- describes the relationship of current demand with past demand Forecast Error- is simply the ‘unexplained’ component of demand that seems to be random in nature Designing a Forecasting Process The primary goal is to generate forecasts that are usable, timely, and accurate The following five steps can help managers achieve this goal… o
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