Forecasting
Scheduling
Supply Chain
Planning and
Scheduling
What is the first step in
establishing priorities?
Forecasting
Demand Management
The primary goal for an organization is to serve
and satisfy the customer
Demand Management
The interface between manufacturing
planning and control and the marketplace
Therefore, it is necessary to recognize andmanage customer demand for all products
This includes 4 major activities:
Forecasting
Order processing
Making delivery promises
Interfacing between planning, control and the
marketplace
Production
Planning
Marketplace
Demand
Management
Master
Production
Schedule
J.R. Tony Arnold, Introduction to Materials Management, 4th edition, Prentice-Hall, 2004, p.217
Demand ForecastingSo, demand
forecasting is the first
step… then, what is
forecasting?
Forecasting
A projection of past information and/or
experience into expectation of demand in
the future.
Underlying basis for all business decisions
Production
Inventory
Personnel
Facilities
1
Supply Chain Planning and
Scheduling
Demand Forecasting
Demand Forecasting
Demand forecasting takesplace at different
levels of the production planning process
Period
Time frame Planning phase
Object of forecast
Long term
2 to 10 years Strategic Business
Plan
Markets, technologies
and capacity
Medium
term
1 to 3 years
Sales and
Operations Plan
Product lines and
families
Short term
Months
Master Production
Schedule
End items and options
All sourcesof demand must be identified:
Customers
Spare parts
Promotions
Intracompany
Other
Demand Forecasting
Factors influencing demand
What are the
characteristics of
demand?
General business and economic conditions
Competitive factors
Market trends
The firm’s own plans for advertising, promotions,
pricing and product changes
Other factors:
Characteristics of Demand
Dependent vs.Independent
Independent
Independent demand is not related to the
demand for any other product
Characteristics of Demand
Demand patterns
Stable
Stable demand retains same general shape
over time
Dynamic
Dynamic demand tends to be erratic
Dynamic
Dependent
Dependent demand occurs when the demand
for an item is derived from that of another item
Stable
Demand
TimeForecasting
2
Supply Chain Planning and
Scheduling
Characteristics of Demand
Trend
Seasonality
Random
Variation
How do we forecast
demand?
Cyclical
Variation
Forecasting Methods
Qualitative
Based on judgment, intuition, and informed
opinions
Quantitative
Extrinsic – based on external indicators that
relate to demand
Intrinsic – the use of historical data to createforecast
Forecasting Methods
Qualitative
Jury of executive opinion
Pool opinions of high-level experts, sometimes augment by
statistical models
Delphi method
Panel of experts, queried iteratively
Sales force composite
Estimates from individual salespersons are reviewed for
reasonableness, then aggregated
Consumer Market Survey
Ask the customer
Forecasting
Forecasting MethodsQualitative
Are based on intuition and informed opinion
Tend to be subjective
Are used for business planning and
forecasting for new products and technologies
Are used for medium-term to long-term
forecasting
Forecasting Methods
Quantitative
Assume that factors influencing past and present will
continue influence in future
Use sets of evenly spaced numerical data (yearly,
quarterly,monthly, weekly, daily)
Data is available in the company and is obtained by
observing a variable at regular time periods,
Forecasts are based only on past values, no other
variables are considered important (except when
using an associative method)
3
Supply Chain Planning and
Scheduling
Forecasting Methods
Quantitative
The Forecasting Process
1.
Determine the use of the...
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