AG Barr Dem Man 1 © The Delos Partnership 2003 Supply and Demand Management Keeping inventory at the right level.

AG Barr Dem Man 1 © The Delos Partnership 2003

Supply and Demand ManagementSupply and Demand Management

Keeping inventory at the right level


What Determines What Determines Inventory?Inventory?

0

100

200

300

400

500

600

700

800

900

1 2 3 4 5 6 7 8 9 10 11 12

Safety StockInventory Level

Average Demand = 100 per week

Lead Time= 4 periods

Safety Stock = 100

Order Quantity = 800Lead Time

Ord

er

Qu

an

tity

S/S


Demand ManagementDemand Management

Forecast Consumption

• What is actually ordered vs forecast

• Abnormal Demand


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 25 25 25 25 25 25 25 25 20 20 20 20

Actual Demand

Proj Avail Balance

75 50 25 0 50 25 0 50 30 10 65 45

Available to Promise

CumulativeATP

Master Schedule

75 75 75

End Item Level ForecastEnd Item Level Forecast

Part Number: 12345 Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100



Customer ProfileCustomer Profile

Customer X 50 per month

Customer Y 10 per month

Customer Z 5 per month

Customers A… 35 per month

Total = 100 per month

Forecast at End Item Level



Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 25 25 25 25 25 25 25 25 20 20 20 20

Actual Demand

Proj Avail Balance

75 50 25 0 50 25 0 50 30 10 65 45


100 75 75 75

CumulativeATP

Master Schedule

75 75 75





Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 25 25 25 25 25 25 25 25 20 20 20 20

Actual Demand

Proj Avail Balance

75 50 25 0 50 25 0 50 30 10 65 45


100 75 75 75

CumulativeATP

Master Schedule

75 75 75



Customer Y wants 10; can we supply it ?


Forecast ConsumptionForecast Consumption

• Review How your software works

• Make sure you have the right settings for you!

• Getting it wrong leads to:

– Instability in the production plan

– Excess Inventory

– Poor Customer Service


Forecast Consumption – Forecast Consumption – unused External Planunused External PlanDemand may be less or more than

forecast !

• Actual customer demand should be monitored to see if shipment plan should be altered

• Actual customer demand should be monitored to see if forecast should be altered


Abnormal demandAbnormal demand

How to identify and how to manage


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 25 25 25 25 25 25 25 25 20 20 20 20

Actual Demand

Proj Avail Balance

75 50 25 0 50 25 0 50 30 10 65 45


CumulativeATP

Master Schedule

75 75 75

Cumul Schedule

0 0 0 0 75 75 75 150 150 150 225 225

End Item Level ForecastEnd Item Level ForecastPart Number: 12345 Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100



Customer ProfileCustomer Profile

Customer X 50 per month

Customer Y 10 per month

Customer Z 5 per month

Customers A… 35 per month

Total = 100 per month

Forecast at End Item Level


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 25 25 25 25 25 25 25 25 20 20 20 20

Actual Demand

Proj Avail Balance

75 50 25 0 50 25 0 50 30 10 65 45


CumulativeATP

Master Schedule

75 75 75

Cumul Schedule

0 0 0 0 75 75 75 150 150 150 225 225




Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 25 25 25 25 25 25 25 25 20 20 20 20

Actual Demand

Proj Avail Balance

75 50 25 0 50 25 0 50 30 10 65 45


CumulativeATP

Master Schedule

75 75 75

Cumul Schedule

0 0 0 0 75 75 75 150 150 150 225 225



Customer Y wants 10; can we supply it ?


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 15 25 25 25 25 25 25 25 20 20 20 20

Actual Demand

10

Proj Avail Balance

75 50 25 0 50 25 0 50 30 10 65 45


90 75 75 75

CumulativeATP

90 90 90 90 165 165 165 240 240 240 315 315

Master Schedule

75 75 75

Cumul Schedule

0 0 0 0 75 75 75 150 150 150 225 225



Customer Z wants 100; can we supply it ?


When can you promise the customer that When can you promise the customer that they can have all the product ?they can have all the product ?

How much is forecast and how much How much is forecast and how much unforecast?unforecast?

How do you know how much is How do you know how much is unforecast?unforecast?

What if they do not like your promise ?What if they do not like your promise ?

Abnormal Demand Abnormal Demand WorkshopWorkshop


Sometimes we need to say no, Sometimes we need to say no, when it really cannot be done, when it really cannot be done,

even if someone else may think even if someone else may think that it can.that it can.

Abnormal DemandAbnormal Demand


Ways to Manage Abnormal Ways to Manage Abnormal DemandDemand

• Safety Capacity

• Safety Stock

• Manage the Product Range

• Reduce Lead Times

• Redesign the Product

• Sell something else!


Averages and Standard Averages and Standard DeviationsDeviations

Observation Actual Forecast Squared

Error

1 25 30 25

2 20 30 100

3 30 30 0

4 60 30 900

5 40 30 100

6 10 30 400

7 30 30 0

8 40 30 100

9 20 30 100

10 25 30 25

“Average”Error =

13.2

Formula isSquare Root of

Average of these

Numbers


Safety Stock - MathsSafety Stock - Maths

Safety Stock = x K x Lead Time

Error Service Factor


Demand ManagementDemand Management

1. Requires proper Forecast consumption techniques

2. Required proper recognition of abnormal demand

3. Required behaviour change


Basic FormulaBasic Formula

Item DataBOM’s

And Routes

StockAnd

Capacity

Master Schedule

Forecasts Orders

Suppliers Factories

What do theyActually Want ?

What haveWe got ?

Whatdoes it need ?

What do we need to do ?

What do we thinktheyWant ?


Planned OrdersPlanned Orders

PlannedOrders

CapacityRequirements

Plan

ComponentPlan

Red Item

14356

Sub-Item

43781

2 per

•Automatic re-plan•Plans Matched sets of Parts•Plans hours for CRP


Master Scheduling Master Scheduling ManagementManagement

Horizon

PLANMANAGEEXECUTE

Cumulative Lead TimeCumulative Lead Time

Add or subtractTo capacity

Strong Link to

Global Sales and OperationsPlanning Process

Capacity andMaterials“firm”

Release Orders


Master Scheduling Master Scheduling ManagementManagement

Horizon

PLANMANAGEEXECUTE


Add or subtractTo capacity

Strong Link to

Global Sales and OperationsPlanning Process

Capacity andMaterials“firm”

Release Orders

Firm Planned Orders

Firm Planned Orders


Material PlanningMaterial Planning

1. Master Scheduler works to Action messages

2. Only release orders when materials available

3. Bottom up replan to get out of problems

4. Use Firm Planned orders for stability and control


Planned OrdersPlanned Orders

Planned/Firm planned

Orders

CapacityRequirements

Plan

ComponentPlan

Red Item

14356

Sub-Item

43781

2 per

•Automatic re-plan•Plans Matched sets of Parts•Plans hours for CRP


Forms of Capacity Forms of Capacity PlanningPlanningTwo types of Capacity Planning

• Rough Cut Capacity Planning– Crucial for GSOP– Also can be used at MPS level

• Detailed Capacity Planning– Information for each work centre– Each Level of BOM


Rough Cut Capacity Rough Cut Capacity PlanningPlanning

RequiredCapacity

DemonstratedCapacity

Family Volumes x

Rate per hour

Family Volumes x

Rate per hour

Actual ProductionPer month

Actual ProductionPer month

CriticalResources


Rough Cut ProfileRough Cut Profile

Key Resources

Units Families

A B C D E F

Forging Supplier Units 2 4 4 2Machining Hrs 12 14 20 5 10Quality Assurance Hrs 3 5 3 10 7 2Plating Hrs 2 5 1 6Assembly Hrs 4 7 2 5Test Hrs 3 7 9 2 5

Hours per 000 units


RCCP Planning ResultRCCP Planning ResultMonth 5Month 5

Key Resources Required Production Volumes

Capacity

A

22

B

20

C

35

D

10

E

15

F

15

Req Dem Max

Forging Supplier

44 80 40 30 194 200 300

Machining 264 490 200 75 150 1179 1000 1200

Quality Assurance

66 100 105 100 105 30 506 500 750

Plating 40 175 10 90 315 280 320

Assembly 88 140 70 50 348 500 550

Test 66 140 315 20 75 616 580 696


Capacity Requirements Capacity Requirements PlanPlan

Opn No

Work Centre

Operation Set Run

10 45 Inspect 0.5 0.10

20 55 Mix 1.0 0.5

30 65 Pack 1.0 0.2

Routing

Work Centre Information

0

10

20

30

40

50

60

1 2 3 4 5 6 7 8

Reqd

Demo

8

Planned Order Release

00Projected Available Balance

2525Scheduled Receipts

202020202020Projected

Gross Requirements

97654321Periods

55 55 55 55 1010 -15-15 1010 1010 1010 -10-10

2525 2525

1515


Capacity Plan resolutionCapacity Plan resolution

Capacity Plan WC 45

105

85

107125

112

75

132123

110

020406080

100120140

1 2 3 4 5 6 7 8 9

Weeks

Ho

urs Required

Demo


Finite versus InfiniteFinite versus Infinite

Infinite Plan

0

20

40

60

80

100

120

1 2 3 4 5 6

Req

Plan

Finite Plan

0

20

40

60

80

100

120

1 2 3 4 5 6

Req

Plan


Problems with FiniteProblems with Finite

• Conceals issues

• Assumes that nothing can be done about capacity

• Makes Customer order late or reschedules supplier

• No consideration of what-if

• No accountability


60

30

30

20

Next/Prev WC

8.0

10.0

0.0

10.0

Set up Time

21/4

23/4

27/5

24/5

Order Due Date

10.0

8.0

2.0

7.5

Run Time

18/3

16/3

13/3

12/3

Op’n DueDate

14/3

14/3

09/03

10/3

Op’n Start Date

Q30

10

Top

32672

411

S20

20

Cap

47823

409

R10

40

Cap

43678

403

Q10

20

Barrel

24575

407

Status

Op’n Number

Quantity

Description

Part No.

Order No.

20

20

20

40

Next?prevWC

5.0

2.0

5.0

3.0

Set up Time

04/04

27/4

22/4

23/4

Order Due Date

7.0

7.0

10.0

5.0

Run Time

17/3

15/3

14/3

13/3

Op’n DueDate

14/3

13/3

11/3

10/3

Op’n Start Date Q0

540

Cap

47823

440

Q40

25

Top

32567

430

R20

20

Barrel

34732

425

R30

30

Body

25763

420

Status

Op’n Number

Quantity

Description

Part No.

Order No.

Work Centre Number 10 Description : Turning Date : 12/3

Jobs Currently at Work Centre

Jobs Coming to this Work Centre

Creation of Work to ListCreation of Work to List1 2 3 4 5 6 7 8

Projected

Gross Requirements

10 10 10 10 20 20 20 20

Scheduled Receipts 20

Projected Available Balance

30

Planned Order Release

Opn No

Work Centre

Operation Set Run

10 45 Inspect 0.5 0.10

20 55 Mix 1.0 0.5

30 65 Pack 1.0 0.2

Routing

Work Centre Information


Work To ListWork To List

Order No. Part No. Description Quantity Op’n Number

Op’n Start Date

Op’n Due

Date

Order Due Date

Set up Time

Run Time Next/Prev WC

Status

407 24575 Barrel 20 10 10/3 12/3 24/5 10.0 7.5 20 Q

403 43678 Cap 40 10 09/03 13/3 27/5 0.0 2.0 30 R

409 47823 Cap 20 20 14/3 16/3 23/4 10.0 8.0 30 S

411 32672 Top 10 30 14/3 18/3 21/4 8.0 10.0 60 Q

Order No. Part No. Description Quantity Op’n Number

Op’n Start Date

Op’n Due

Date

Order Due Date

Set up Time

Run Time Next?prev

WC

Status

420 25763 Body 30 30 10/3 13/3 23/4 3.0 5.0 40 R

425 34732 Barrel 20 20 11/3 14/3 22/4 5.0 10.0 20 R

430 32567 Top 25 40 13/3 15/3 27/4 2.0 7.0 20 Q

440 47823 Cap 40 05 14/3 17/3 04/04 5.0 7.0 20 Q

Work Centre Number 10 Description : Turning Date : 12/3

Jobs Currently at Work Centre

Jobs Coming to this Work Centre


KanbanKanban

• Means “visible signal”

• Replaces need for Work to List

• Replaced by– Card– Empty square– Tennis Ball– Empty package


Time Fence PolicyTime Fence Policy

Horizon

YESYESPERHAPSPERHAPSNONO


Firm Planned OrdersFirm Planned Orders

MaterialMaterial

CapacityCapacity

Can I changeCan I change the schedule ? the schedule ?

AG Barr Dem Man 1 © The Delos Partnership 2003 Supply and Demand Management Keeping inventory at the right level.

Documents

ag barr dem man

delos partnership

month forecast

abnormal demand slide

actual customer demand

end item level slide

abnormal demand workshop

right level slide