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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