Logistics Chapter 7: Demand Management
______________________________________________________________________
Introduction:
First:
Outbound-to-customer logistics = physical distribution
Refers to: processes, systems, and capabilities that enhance an organisation’s ability to serve
its customers
Improves customer service
Second:
Inbound- to – operations logistics = activities and processes that precede and facilitate
value-adding activities such as procurement manufacturing and assembly.
Demand Management:
focused efforts to estimate and manage customer’s demand, with the intention of using this
information to shape operating decisions.
Ultimately: improve collaboration throughout chain on all activities relating to the flow of
product, capital, information and services.
Synchronization
Common problems:
Lack of coordination = no coordinated response to demand info [functional silo’s]
Too much emphasis on forecast and less focus on plans and efforts needed
Non-strategic uses of demand info = more for tactical and operational than for strategic
purposes [missed opportunities]
Importance of demand management:
Enhance growth of the organisation
Grow portfolio positioning and investment strategies
Guide strategic resources
,Problem of Supply – Demand Misalignment:
, Supply and Demand Balancing methods:
External methods Internal methods
Change the manner in which the manage the gap using internal
customer orders processes
Eg: price Eg: inventory
Lead time Production flexibility
organisations usually implement all 4 strategies
Use and level are determined by the nature of the product, cost of stocking out, and ability
to accurately forecast customer demand
Bullwhip Effect:
Also known as whiplash and Forrester effect
“oscillating demand magnification upstream”
Increasing distortion of true demand as information moves further up the SC
Examples:
- CIPS
- COVID panic buying
- note reasons why the bullwhip effect occurs and how it can be reduced (will be examined)
Demand forecasting:
Forecasts serve as plans for both marketing and operations to set goals and develop
execution strategies (developed through S&OP)
Characteristics:
Start of all planning
Predictions of the future are often wrong
Poor forecasts trigger poor effects
Demand is not a single demand (decomposition of demand)
KEY:
MINIMISE ERROR BETWEEN
ACTUAL AND FORECAST DEMAND
______________________________________________________________________
Introduction:
First:
Outbound-to-customer logistics = physical distribution
Refers to: processes, systems, and capabilities that enhance an organisation’s ability to serve
its customers
Improves customer service
Second:
Inbound- to – operations logistics = activities and processes that precede and facilitate
value-adding activities such as procurement manufacturing and assembly.
Demand Management:
focused efforts to estimate and manage customer’s demand, with the intention of using this
information to shape operating decisions.
Ultimately: improve collaboration throughout chain on all activities relating to the flow of
product, capital, information and services.
Synchronization
Common problems:
Lack of coordination = no coordinated response to demand info [functional silo’s]
Too much emphasis on forecast and less focus on plans and efforts needed
Non-strategic uses of demand info = more for tactical and operational than for strategic
purposes [missed opportunities]
Importance of demand management:
Enhance growth of the organisation
Grow portfolio positioning and investment strategies
Guide strategic resources
,Problem of Supply – Demand Misalignment:
, Supply and Demand Balancing methods:
External methods Internal methods
Change the manner in which the manage the gap using internal
customer orders processes
Eg: price Eg: inventory
Lead time Production flexibility
organisations usually implement all 4 strategies
Use and level are determined by the nature of the product, cost of stocking out, and ability
to accurately forecast customer demand
Bullwhip Effect:
Also known as whiplash and Forrester effect
“oscillating demand magnification upstream”
Increasing distortion of true demand as information moves further up the SC
Examples:
- CIPS
- COVID panic buying
- note reasons why the bullwhip effect occurs and how it can be reduced (will be examined)
Demand forecasting:
Forecasts serve as plans for both marketing and operations to set goals and develop
execution strategies (developed through S&OP)
Characteristics:
Start of all planning
Predictions of the future are often wrong
Poor forecasts trigger poor effects
Demand is not a single demand (decomposition of demand)
KEY:
MINIMISE ERROR BETWEEN
ACTUAL AND FORECAST DEMAND
