Tuesday, February 15, 2011

Lead Time Reduction: Demand Planning

Planning Function, and its 4 components:

demand planning
supply planning
production planning
distribution planning
The first component is "Demand Planning": this is the process of estimating and monitoring customer demand.

The goals of demand planning are:

minimizing the error between the forecast and the actual demand (improving the estimation)

quickly responding to demand variation

aligning operations with customer demands

synchronizing the planning across customers, sales, marketing and finance

Demand Planning can be improved by:

improving historical demand analysis (software, Business Intelligence tools)

making an ABC-analysis of the items to forecast, and applying different strategies for A, B and C items.

Example:

A-items are reviewed each month by management

only those B- and C-items with a significant deviation between forecast and actual demand need to be reviewed by management

building effective communication channels with the customers

EDI

Internet

collaborating with the customers

sharing information: sales data, inventory data

collaborative planning

encouraging the customers to place their orders more evenly

When we can improve the demand planning, we know better which products we have to make, so that

the lead time will be reduced (we don't make the wrong products)

the safety stock can be reduced (demand uncertainty is reduced)

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