SCM 410 - Week 8a Multiple Choice

Demand Management?

• Focused efforts to estimate and manage customers’ demand, with the intention of using this information to shape operating decisions.

Independent Demand?

• Demand for the finished good.

  • Finished product like bicycle.

Dependent Demand?

• Demand for the component parts.

  • Tires for bicycles.

Internal and external parties should reach a consensus on the demand forecast?

• Which is achieved through structured processes and integrated information systems.

Internal Forecasts?

• Sales & Operations Planning (S&OP) – Five Step Process

External Forecasts?

• Collaborative Planning, Forecasting, and Replenishment (CPFR)

Demand Management?

• Focused efforts to estimate and manage customers’ demand, with the intention of using this information to shape operating decisions.

Important?

• Helps companies make informed decisions by predicting future trends or outcomes; reduces uncertainty, improves planning, and supports resource allocation.

Difficult?

• While techniques exist to forecast demand, in general, all forecasts will ultimately be wrong (goal is to minimize error between actual and forecasted demand).

All demand is subject to?

• Certain fluctuations.

Random Variation?

• 
  

• Lecture notes:

  • Can’t be predicted “it’s random”.

  • 
    

Trend Variation?

• -

• Lecture notes:

  • 3-5 years, popular

Seasonal Patterns?

• Demand that changes in a shorter period of times. Centered around holidays, repeat every year.

Business Cycles?

• Macroeconomic. Big ticket items = like cars, jewelry, construction, dip in demand for luxury items,

Demand Management (2):

• Focused efforts to estimate and manage customers’ demand, with the intention of using this information to shape operating decisions.

Supply and demand will likely?

• Never be balanced to allow for zero stock-outs or zero safety stocks; thus there’s four methods to manage an imbalance.

External Balancing Methods?

• Price and Lead Time

Internal Balancing Methods?

• Production Flexibility

• Inventory Flexibility

External Balancing Methods?

• Attempt to change or influence the customer orders to balance the supply-demand gap (relating to demand).

Price (Law of Demand)?

• If demand is less than current inventory levels (i.e., stored inventory), a price reduction should increase demand, and vice versa.

Lead Time (Available)?

If demand exceeds the current supply (i.e., shortages), increasing expected lead times should decrease demand, and vice versa.

• Lecture notes: Substitutes don’t always lead to customer satisfaction.

Internal Balancing Methods?

• Utilizing an organization’s internal processes as a way to balance a supply-demand gap (relates to the supply).

Production Flexibility?

• Changing production lines from a product to another (i.e., lean manufacturing) - react quickly to changing demand by altering the production schedules.

Inventory Flexibility?

• Companies produce products to a forecast that includes safety stock to smooth the effects of demand and lead time variability (common and expensive).