—When, how much, and how to replenish stock
Customer service based on in-stock
—Trade-off between inventory and level of service
Improvements are made by
—Decreasing lead time
—Understanding how components combine to become finished goods
—Huge number of possible configurations, many of which will never be ordered
Focus on inventory of components
—Easier than inventory of finished goods
Must manage customer order process
—Lead times, availability, etc.
Order decoupling point may move to the supplier
—Coordination becomes essentiale
is a manufacturing process in which manufacturing starts only after a customer’s order is received
SOP combines forecasts with resource planning to develop aggregate production plans
Provide suppliers with long-term production plans, not just current purchase orders.
Suppliers can better plan their operations
Must overcome trust issues
Find ways to increase overall supply chain value
Used when situation is ‘stable’ & historical data exist
Involves mathematical models
Used when situation is vague & little data exist
—When demand is driven by changes in other factors
—Identify historical patterns and forecast into the future.
—If we know that sales are 20% above average each January, the forecast for next January should be upward 20%.
—This is an inappropriate method for weekly sales fluctuations that are the result of price and advertising changes.
– Choice of N in the forecast
Advantages: Smoothes out random variations in demand
Disadvantage: reacts slowly to changes in demand
Advantages: Reacts quickly to shifts in demand
Disadvantages: Doesn’t smooth out random variation
Weights most recent data more strongly
Reacts more to recent changes
Widely used, trusted method
Trend changes from period to period
Set Trend = 0
No Forecast for period 1
P2 Forecast = Level from P1 + Trend P1