Demands101 Forecasting Planning Aggre. planning S&OP Lecture 04: Forecasting and Demand Planning Oran Kittithreerapronchai 1 1 Department of Industrial Engineering, Chulalongkorn University Bangkok 10330 THAILAND last updated: May 4, 2017 LSCM v2.0 1/ 24
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Lecture 04: Forecasting and Demand Planningoran/classes/LSCM_resources/handout/LSCM... · Lecture 04: Forecasting and Demand Planning ... Aggregate planning & Demand management ...
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Are these terms difference?demand =? sale =? order =? forecast
Thinking Points: Recall your last dinning experienceHow to estimate resources restaurants should have?Which channel do restaurants receive ‘demand’ information? how reliable?What happen if restaurants estimate incorrectly?
Understanding nature of demandPrioritizing independent easy to monitor demandForecasting ‘reasonable’ demandCommunicating and updating demand forecastInfluencing quantity and time of demand
Aggregate VS Market: Why do we think about demand of our brand?Stochastic VS Deterministic: Why do we think about constant demand?Dependent VS Independent: Why do we think about independent demand?
Motivation: HP CustomizationMotivation: Inventory, nature of demand, multiple marketsIdea: delay the differentiation of product/processRelated concept: localization, simple and modular designTrade-offs: economy of scale, production cost VS inventory, transportationImplementation: cross-organization coordination (manufacturing,purchasing, R&D, market)
Product design: reducing inventory & leadtime by std parts & manuf.Process design: delaying process differentiation by technologyAgile supply chain: time based competitive
Example: DeskJet, Paint mixture, Benetton shirt, HP hard drive test
You don’t get what you want in lifeYou get what you focus on and expect.
—Tony Rush
Therefore: focus on few that are importantApplication: ABC analysis
Class A important (15-20 percentile → for 55-75% of activity)Class B some-what important (20-50 percentile → 15-15% of activity)Class C not important (50-100 percentile → 5-15% of activity)
What: A process to understand systematic of demandsFacts: Inaccurateness, but all companies need it
Forecasting is, typically, incorrectForecasting is suitable for a group of productsForecasting is inaccurate as time horizon increases
Ideal: Valid for short time and need updatedAware Art & Science: roles of marketing & sale; common misconceptTypes: Qualitative, Time Series, Regression, Simulation
Description: story, relationship with other dataTime Horizon: hour, day, week, year
Actual = Forecast + errorPattern of Data: seasonal, trend, cycleForecasting Model: assumption, data required, parameters, static VSdynamicAccuracy: measuring, how to improve
Hierarchical: decision in upper-level → constraint in lower-levelFeedback: systematic correctionMan-Machine interface: ∃/ exceptions → including man’Single’ database & Integration: maintaining data integrity and accuracyTransparency: understanding logic and algorithm behind system
source: Chase & Jacabs. 2010. Operation and Supply Chain Management.
Project: product remains in a fixed locationWork center: similar equipment or functions are grouped togetherManufacturing Cell: dedicated area where similar products are producedAssemble line: processes are arranged according to the progressive stepsContinuous process: assembly line only the flow is continuous
Red Tomato : Aggregate planningRed Tomato Tool, a US gardening tool manufacturer, usually faces with highly seasonaldemands and considers three distinguish strategies as follow:
Strategies Month Demand Month Demanda) adding seasonal worker Jan. 1600 Apr. 3800b) using subcontractor Feb. 3000 May 2200c) building inventory/backlog Mar. 3200 Jun 2200
The company sells each tool for $40 that requires 4 hour and has initial inventory andworkers in January of 1000 unit and 80 employees, respectively. A employee of RedTomato typically works 8 hours a day and earns $4 per hour during regular time.Because of labor law, no worker can work more than 20 days of regular time per monthand 10 hours of overtime per month.
Determine the most suitable ’pure’ strategy and the optimal ’mixed’ strategy thatmaximizes profit if the company profile must have at least 500 units in June.
MethodsPrice taker: price can influence demand or negotiation (what if) → S&OPInventory of component: lack of components → MPS & MRPCapacity issues: simplified production constraints
ApplicationAggregate product: no information on exact product → communicationDelivery plan: frequency, product mixed, lot size → communication
What: manage supply or demand to smooth production given predictablevariabilityIdea: seasonal consumer demand, but fixed plant capacityManaging supply: capacity (flexible workforce & machine, subcontracting),investing (common component)Managing demand: shift or manipulate demand (using price) or promotion;may result to
Market growth:Forward buying:Stealing market share: depending on competitors