Demand Management

Bharati Vidyapeeth College of Engg., Kharghar, Navi Mumbai. ACADEMIC YEAR 2009-10

SEMINAR REPORT ON

DEMAND MANAGEMENT Demand Management in manufacturing planning and control system.

CLASS:

B.E. MECH -B

Submitted by PRASHANT P.

4735

BHUPESH

G.

TAKSALE SANKHE

4730 SUBJECT

TEACHER

H.O.D

DEPARTMENT OF MECHANICAL ENGG. 1

DEMAND MANAGEMENT Demand Management in manufacturing planning and control system.

INTRODUCTION Demand management activities are widely scatted throughout the firm. Marketing and sales departments have a big role to play in it. Physical distribution and customer service departments do some activities. Some companies

have

set

up

supply

chain

management

departments

to

coordinate demand management activities. A well managed system must clearly assign responsibilities to make sure nothing is left to chance. The data produced in the demand management module must be accurate, timely, and appropriate to facilitate proper decision making in manufacturing planning. Discipline is required and is to be enforced in the system to ensure accuracy of the data. Make-to-Knowledge: A manufacturing facility has a pipe of capacity which is filled with customer orders in the short run and forecasted orders in the long.

Whenever actual orders come, the forecasted orders are

consumed with actual orders. The performance of manufacturing is improved when partnerships are created in the supply chain and knowledge of the supplier is increased about a customer’s need. Vendor managed inventories at customer end is an example of such partnership. In such partnerships, the Point-of-Sale (POS) data are electronically passed to the suppliers and supplier knows the inventory on the shelf in real time. Detailed product mix is required for shop floor control (Master production scheduling) where as demand information at higher level is

2

sufficient for annual plans or manufacturing planning (Sales and Operations planning). Demand management is concerned with identifying all sources of demand for manufacturing capacity apart from regular sales of the product. The additional sources of demand can be service-part requirement, intracompany requirements, promotional inventory buildup, pipeline inventory buildup etc. All potential demands sources are to be contacted and information is to be gathered from them assess demand in the future planning period.

Demand Management and production planning. Demand Management Module Demand management (demand assessment) is a module in manufacturing planning and control system (MPC). In this module, all potential demands on manufacturing capacity are collected and coordinated for developing manufacturing plans. Demand management module activities include determining or estimating the demand from customers and from within the company or organization, balancing demand and supply, order booking and determining promised delivery dates.

A) Demand management in MPU system.

3

Resource planning

Production planning

Market places

Demand Manageme nt Master production schedule Demand management encompasses forecasting, order entry, order delivery, date promising, customer order services, physical distribution & other sources of demand for manufacturing capacity. Include care services part demands, intra company requirements & pipeline inventory stocking .All qualities and timing for demand must be planned and controlled. Demand management depend upon all the aspect of manufacturing process, unit & planning of production. Above fig. we come to know that relation between all aspect and Demand Management

B) Demand Management & Production planning

The exact link of demand management and production planning depends to some extent on the way in which production planning is done in way firm. If the production plan is a quarterly statement of output in any financial measure, then key requirement for demand planning is for synchronizations with this target. If the delivery timing for significant customer order is late it will affect the production plan. Similarly major 4

change in distribution & inventory policy might influences on production plane. All source of demand must be taken into account. It also include in production plan to provide synchronation with other MPC activity. The interaction of demand management and MPC are frequent & detailed. In all instants the underlying concept is that of demand being consumed over timed by actual customer order. In each company environment the objective in the demand management module is to bridge the firm the customer. Every company applied different type of demand planning on basis of customer requirement. Demand management task of specified all sources of demand on facility imparts master production scheduling in several ways. Some of the sources will be handled directly in master production schedule, such as pipeline inventory buildup, special exhibition requirement & inter part transfer. To adequately performance rough cut capacity planning, the service part demand will have to be included. This could be done on rough basis by estimating services part demand in monitoring unit. Demand management is a gateway module in MPC and it links manufacturing facilities to the market and physical distribution system of the company

A)

DEMAND MANAGEMENT AND

FACTORS. Out bond product flow Distribution activities are planned on basis of information developed in demand management function. Customer delivery promises data, inventory resupply, shipment, interplant shipment and so on. are all used to developed short term transportation schedule can 5

be interpreted with distribution planning as well. the information can be used to plan and control warehouse supply .transportation capacity and other recourses within which days to day distribution function will operate can be also better planned and controlled with the information. As changed occur in market place, demand management can and should routinely pick up, indicating when managerial attention is required. It’s in demand management that service level and resultant safely stock are expired defined. The master scheduler is then responsible for maintains the required level of buffer stock and timing. Data Capture The data capture and monitoring activity of demand management fall into two brode categories 1.ovarall market 2. Product mix The activity most appropriate for production planning is basic market trends and pattern. The data should corresponds to the units used in production planning ,the intent is to determine on an ongoing basis ,the general level of actual business for input to the production planning process. For both the overall market and the detail product mix ,its important that demand data be capture where possible. Many companies use sales instead of demand for purpose of making demand projections. Unless all demand have been satisfied, sales, can understate the actual demand.

Dealing with day to day customers orders

6

A primary function of the demand management module is converting specific day to day customer orders into detailed MPC action .its through the demand management function that the actual customer demands in to production action must be preformed regardless of whether the firm manufacturing make to stock ,make to order. The detail may be somewhat, depending on the nature of the manufacture condition in the company. In the make to order environment, the primary activity is control of customer orders in order to meet customer delivery dates. This must be related to master production schedule to determine impact of any engineering change on final customer requirement. In make to stock environment, demand management does not ordinary provide promises date, since material is in stock the customer most often to inventory.

Demand Management techniques Appropriate Forecast Information For strategic decision of setting up new plants etc. highly aggregated estimates of general business trends over long term are made. Top management is heavily involved in the development of these estimates. 7

Economic growth models and management judgment are used in developing these estimates. Using the economic growth models will lead to improved forecasting and helps neutralize any emotional attachment of decision makers to their proposals. The forecasts needed for sales and operations planning are in units of product families. Customer plans are an important input into the forecasting exercise at this level. Current trends are captured and any marketing plans to influence demand are also included in developing the forecasts. Forecasting required for master production scheduling (MPS) uses statistical or mechanical procedures that use past data. But managers can review the estimates given by the mechanical rules and modify them when required in light of their specific knowledge regarding market conditions which the statistical model cannot capture. In furcating basically looked at evidence from comparative empirical studies to identify methods that can be useful for predicting demand in various situations and to warn against methods that should not be used. In general, use structured methods and avoid intuition, unstructured meetings, focus groups, and data mining. In situations where there are sufficient data, use quantitative methods including extrapolation, quantitative analogies, rule-based forecasting, and causal methods. Otherwise, use methods that structure judgement including surveys

of

structured

intentions analogies,

and and

expectations, simulated

judgmental

interaction.

bootstrapping,

Managers’

domain

knowledge should be incorporated into statistical forecasts. Methods for combining forecasts, including Delphi and prediction markets, improve accuracy. We provide guidelines for the effective use of forecasts, including such procedures as scenarios. Few organizations use many of the methods described in this paper. Thus, there are opportunities to improve efficiency by adopting these forecasting practices. 8

1. Forecasting Methods 2.1 Aggregating Forecasts Aggregate forecasts are to be developed to provide forecasts to support higher levels of planning. Also aggregate forecasts help in evaluating detailed forecasts of individual items. Aggregating individual products into product lines, geographical areas, or customer types must be done in ways that are compatible with the planning systems. The groups must make sense to forecasters. Pyramid forecasting a name given to a method where in forecasts at lower levels are combined and compared with higher level aggregate forecasts up to the level of company or the business unit and planning decisions are taken. Then the top level determined plan is forced down reconciling higher level aggregate forecast and the lower level summed up forecasts. Often forecasting is prepared for variety of business decision by many different people in the company. One mean of providing consistent of forecasting for various purposed in through the billed of material (BOM). Demand fence planning Using BOM pull the forecasting. fence

Make to order Assemble to order B) Demand Management. Production scheduling

Make to Stock Forecasting order

9

2.2 Make to stock demand management Provide adequate inventory to meet the need of customers throughout the distribution system,& maintain desired customer services level ,required detailed forecasting . Deposited our arguments for the increase accrued of aggregate forecasting the need in make to stock situation is for item level forecasting by location and by time period. The use of safety stock in inventory is quite common .less common is the safety lead time. In instances of where the finished product is transported to distant inventory location such as warehouse & distribution center. There is often range of time during which delivery can be taken places.

 Key focus is MAINTENANCE of FGI.  TRACKING of demand by location throughout the supply chain is an important activity.

10

 Key issue is HOW, WHEN & HOW MUCH, to REPLENISH STOCK at a

specific location (physical distribution concern).  Firms employ distribution centers, warehouses, and even vendormanaged inventory inside their customer’s location.  Managers require information on the INVENTORY STATUS in the various locations, relationships with transportation providers, and estimates of demand by location and item (forecasting).  Satisfying customers requires BALANCING the level of inventory

against the level of service to the customers. A trade-off between the inventory costs and the level of service must be made.  IMPROVEMENTS can be made by having better knowledge of demand, +

rapid

transportation

alternatives,

speedier

production,

more

flexibility 1.3 Assemble to order demand

In assemble to order environment basically about making accurate promises dates to customer are taken. This requires MPS stability and predictability .t the focus on stability in information in the system and MPS should not be taken as an argument for inflexibility. For assemble to order product the use of heading provide as effective, easily managed buffering tech. Selecting the fences managing customer orders and deciding hedge quality depend on both ,economics trade off and current condition setting the time fencing too early means that the inventory will be carried at higher level in the product structure ,which often decrease alternative use of basic material.  The primary task of Demand Management is to DEFINE THE CUSTOMER’S ORDER in terms of alternative components and options.

11

 It is important that they be COMBINED into a viable product in a process known as configuration management.  One of the capabilities required for success is ENGINEERING DESIGN

that enables as much flexibility as possible in combining components, options, and modules into the finished products  In this environment the independent demand for the assembled items is TRANSFORMED into dependent demand for the parts required to produce the components needed.  The inventory that defines customer service is the inventory of COMPONENTS not finished products.

1.4

Make to order demand management In this type of demand very much concerned with the control

of customer order after they are entered in to the system. In this case demand management has to track these order through all phase of plant activity, include the engineering related functions. Through that there three different taking reason depend upon situation which carried out. To forecast using quantitative analogies, ask experts to identify situations that are analogous to the target situation and for which data are available. If the analogous data provides information about the future of the target situation, such as per capita ticket sales for a play that is touring from city to city, forecast by calculating averages. If not, construct one model using target situation data and another using analogous data. Combine the parameters of the models, and forecast with the combined model.

12

 MOVING THE CUSTOMER decoupling point to raw material or even suppliers reduces the scope of dependent demand information.  The

task

of

COORDINATE

demand

management

INFORMATION

on

in

this

customers’

environment product

needs

is

to

with

engineering.

 Demand

management

now

includes

determining

HOW

MUCH

ENGINEERING CAPACITY will be required to meet future customer needs  In these environments, suppliers’ capabilities may limit what we are able to do, so COORDINATION with them is essential.  This span of involvement from customer to supplier gives rise to the

term supply chain (or demand chain) and  The coordination of activities along the supply chain is referred to as

supply chain management

13

C)MANAGING DEMAND In this section managerial issues related to the performances of day to day demand management task are explained. And this is very important in point of demand management.

1.1

organizing demand management Many of the activity of demand management are already

performed in most companies in many instances the organization responsibility for performances these activity is widely scattered through the firm. Company plans typically require the cooperation of many people. An organization may decide to implement a given marketing strategy, but will it be able to carry out the plan? Sometimes an organization fails to implement a plan because of a lack of resources, misunderstanding,

opposition

by

key

stakeholders,

or

a

lack

of

commitment by key people. The need to forecast organizational behavior is sometimes overlooked and can be important. Better forecasting here might lead to more realistic plans and to plans that are easier to implement. Surveys of key decision makers in an organization may help to assess whether a given strategy can be implemented successfully. Simulated interactions can provide useful forecasts in such situations. Without an efficient, proactive approach to resolve forecast errors, managing exceptions can be time-consuming and costly. Our Advanced Exception Management gives you the flexibility to adjust the logic and business rules that govern the creation and management of 14

exceptions. This tool improves productivity by enabling automatic detection and self-correction of many problems. Demand management is a major concern in many industries as companies realize the importance of creating an integrated relationship with their suppliers and customers. Managing the Demand chain has become a way of improving competitiveness by reducing uncertainty and improving service. One aspect of successfully managing the Demand chain requires that a company understand their logistical strategies and practices. 3.2 Managing services level Demand Management should be regarded as a fundamental part of ‘best value for money’ asset management. It should be considered whenever change in the community’s need for a service is forecast or when a new service is contemplated. When adopted as part of strategic asset management, Demand Management techniques create Confidence in decisions relating to: • Procurement of new assets; • Refurbishment of existing assets; • Management of existing assets, or • Disposal of existing assets. Key managers should be involved in the Demand Management procedure to identify strategies, assess risk and make decisions. This involvement will enable a clear understanding of the impact changes in the availability of resources and services will have. In particular, other agencies that may be affected should be included in the process to ensure that demand is not simply shifted from one agency to another. The elements of managing service level include: • Identifying, defining and measuring current and future service demand 15

• Measuring current and future service capacity • Measuring the gap between projected demand and capacity • Identifying strategies to influence demand, including an assessment of the potential impact of those strategies • Performing a risk analysis • Selecting a Demand Management strategy • Implementing the strategy • Monitoring its impact • Reviewing its process and success.

The Unique Alternative to the Big Four®

Case Study No. 1: PROBLEM 16

Company deploys demand planning technology without addressing people, process,

and change management. Inconsistent set of demand

and inventory planning practices across North American business units.

Impact: No buy-in or collaboration from key stakeholders (Sales, Marketing, Finance, Advertising, and Supply Chain) and absence of single number consensus forecast.

SOLUTION: Demand management relaunched with focus on process and change management. Facilitated process design and defined roles and responsibilities.

Impact: Forecast accuracy improved by more than 20 percent and achieved single number consensus forecast through improved collaboration and communication among key stakeholders.

17