Demand Management

1
Demand Management

• Demand Management
• Demand Forecasting
• Demand Tracking

2
Demand Management

• What does a firm want in its demand and
  production patterns?
• What drives demand
• Try to influence the timing
• Or to reduce the uncertainty
• Dow
• Why???

3
Demand Management for Service Firms

• 1. Maintain sufficient capacity to serve every
  customer immediately
• Anyone see a problem with that?
• 2. Influence the demand pattern to make it match
  the firms capacity
• Make wait time information available to
  customers
• Use appointment system

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Demand Management for Service Firms

• 3. Price to stimulate demand during slack
  periods/ lessen demand during busy periods
• variant ripe-banana pricing strategy
• What is the problem in bid industry when firm
  turns down work?
• 4. Service-delay management
• make people wait for service
• Text describes this as dangerous - has it ever
  happened to you?
• Waiting management program
• Examples?

5
Demand Management for Manufacturers

• Promised delivery date (Make to Order, Assemble
  to Order)
• Inventory management (Make to Stock)
• Assign Order Priority
• Maintain Slack

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Demand Forecasting ProcessMelnyk Denzler via
Wight

• 1. Identify people and processes that need the
  forecast.
• 2. Identify the best data inputs
• 3. Select proper forecasting techniques
• 4. Apply the techniques. State your assumptions.
• 5. Monitor the performance of the forecasting
  process.

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Types of Forecast

• Demand Forecast
• Supply Forecast
• Purchase of Supply Source
• Price Forecast
• Exchange Rate Fluctuation

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Planning Horizons(1st Influencing Factor)

• Long Range Demand-- 5 Years Out
• Intermediate Demand-- 1-2 Years Out
• Short Range Demand--Less Than 1 Year
• Buildup
• Breakdown Homogenous Corporate

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Demand ForecastingInfluencing FactorsMakridakis
and Wheelwright, 1989

• Time Horizon (next slide)
• Level of Detail
• Number of Demand Segments
• Control vs. Planning
• Constancy
• Existing Business Processes

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Qualitative Forecasting Methods

• Grass-Roots Forecasting
• Focused Forecasting
• Historical Analogy
• Market Research Forecasting Tools
• Delphi Method

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Delphi Example
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Quantitative Forecasting

• Historical time-series
• Rough Cut / Trends
• Seasonal Adjustments
• Casual studies
• correlation
• Mathematical or simulation models

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Demand Tracking Methods

• Naive Forecasts
• Weighted / Moving Averages
• What is a problem with weighted averages?
• Know how to calculate
• Exponential Smoothing (emphasize recent data)
• Adaptive Forecasting (use recent forecast errors)

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Forecast Error

• The algebraic difference between the current
  actual sales and the projected sales that were
  extrapolated one sales period earlier
• MAD - Mean Average Deviation
• MSE - Mean Square Error
• Need to understand
• Dont need to calculate

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Forecast Error

• Trumpet of DOOM

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Kmart Demand
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Next Time

• Problem 16. (on p484)
• a and e only
• Goal

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    BREAKEVEN _at_ TC TR   FIXED COST SALES
UNITS X (PRICE-(MATERIA-LABOROVERHEAD))
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Problem 10.16