Supply Chain Management, Demand and Customer Service

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Supply Chain ManagementSupply Chain Management, Demand and Customer ServicePresentations By Rajendran Ananda Krishnan,

Transcript of Supply Chain Management, Demand and Customer Service

  • 1. Supply Chain Management:Demand management andCustomer Service Rajendran Ananda Krishnan

2. Topics to be covered Demand management and CustomerService Outboundto customer logisticssystems Demand Management Traditional forecasting CPFRP, Customer Service Expected cost of stockouts Channels of distribution prettythings 3. Outbound-to-Customer LogisticsSystemsOutbound-to-customer Logistics systems,also referred to as physical distribution, refersto the set of processes, systems andcapabilities that enhance a firms ability to serveits customers. In an effort to serve theircustomers, many firms have placed significantemphasis on outbound-to-customer logisticssystems.Inbound-to-operations Logistics systems refersto the activities and processes that precede andfacilitate value-adding activities such asmanufacturing, assembly and so on. It as alsoreferred to as materials management and prettythings 4. Demand Management Demand management may be thought of asfocused efforts to estimate and managecustomers demand with the intention of usingthis information to shape operating decisions. The essence of demand management is tofurther improve the ability of firms throughoutthe supply chain-particularly manufacturingthrough the customer-to collaborate onactivities related to the flow of product, services,information and capital. The desired end result should be to creategreater value for the end user or consumer , forwhom all supply chain activities should be 5. The following list suggests a number of ways in whicheffective demand management will help to unify channelmembers with the common goal of satisfying customersand solving customer problems: Gathering and analyzing knowledge about customers,their problems and their unmet needs. Identifying partners to perform the functions needed inthe demand chain. Moving the functions that need to be done to the channelmember that can perform them most effectively andefficiently. Sharing with other supply chain members knowledgeabout consumers and customers, available technology,and logistics challenges and opportunities. Developing products and services that solve customersproblems. Developing and executing the best logistics,transportation and distribution methods to deliverproducts and services to consumers in the desired 6. Supply Demand Misalignment prettythings 7. Refer to the graph given in class on Supply-demand misalignment (Page No 186-A logistics Approach to Supply Chain Management by Coyle, Bardi & Langley)Supply-Demand Misalignment In the firstphase of a new product launch, when end-userdemand is at its peak and opportunities forprofit margins are greatest, PC assemblers arenot able to supply product in quantitiessufficient to meet demand-thus creating trueproduct shortages.Also during this time-frame, distributors andresellers tend to over-order, often creatingsubstantial phantom demand.In the next phase, as production begins to rampup, assemblers ship product against thisinflated order situation and book sales at thepremium high-level launch price. As channelinventories begin to fill, price competition to set in, and orders are cancelled or prettythings 8. In the final phase, as end user demandbegins to decline, the situation clearly hasshifted to one of over supply. This is largelydue to the industrys planning processes andsystems, which are primarily designed touse previous period demand as a gauge.The net result of these behaviors in aligningsupply and demand is that a large majorityof product is sold during the declining periodof profit opportunity, thereby diminishingsubstantial value creation opportunities forindustry participants. 9. Traditional Forecasting A major component of demand managementis forecasting the amount of product that willbe purchased by consumers or end users.Although forecasts are made throughout thesupply chain, the single most importantforecast is that of primary demand. In a trulyintegrated supply chain scenario, all otherdemand will emanate directly from-or at leastbe influenced by primary demand. prettythings 10. Integrating forecasting and productionI Step Develop a twelve-month forecast of demand by month by applying traditional demand forecasting approaches (e.g. moving average, exponential smoothing, Regression analysis etc.) to a three year history file of data on factors such as demand, price, seasonality, availability, deals and promotions.II Step Brand and product managers review this forecast and recommend relevant changes.III Step Developing aggregate production schedules for the next twelve-month period and allocating specific production requirements to 11. Integration of sales forecasting and ProductionHistory file ( 3 Years demand, price,Brand and product Aggregate production seasonality, deals, managers reviewschedules (12 promotions etc.and recommendmonths) changes Forecasting model (moving averages,RevisedAllocation of regression analysisforecastaggregateetc.)requirements to plants Gross market Short-term 12-month requirements (1 toforecast (byproduction3 year periods) month) scheduling prettythings 12. Purposes of forecasting Long-term forecasts usually cover morethan three years and are used for long-rangeplanning and strategic issues. Midrange forecasts in the one-to three yearrange- address budgeting issues and salesplans. Short-term forecasts are most important forthe operational logistics planning process.They project demand into the several monthsahead and are focusing increasingly onshorter time intervals. prettythings 13. Collaborative Planning, Forecasting And Replenishment(CPFR) Initiatives that have attempted to create efficiency and effectiveness through integration of supply chain activities and processes have been identified as quick response, electronic datainterchange(EDI), shortcycle manufacturing, vendor managed inventory (VMI), continuous replenishment planning (CRP) and efficient consumer response (ECR). CPFR has become recognized as a breakthrough business model for planning, forecasting and replenishment. Using this approach, retailers, transportproviders, distributors and manufacturers can utilize available internet-basedtechnologiesto collaborate from operational planning through execution. CPFR simplifies and streamlines prettythings 14. CPFR Business Model 15. Development of CPFR came from an effort byWal Mart and one of its suppliers, Warner-Lambert Company, particularly with regard to itsListerine brand product. In addition torationalizing inventories of specific line itemsand addressing out-of-stock occurrences, thesetwo companies collaborated to increase theirforecasting accuracy, so as to have just theright amount of inventory where it was needed,when it was needed. CPFR emphasizes a sharing of consumerpurchasing data among and between tradingpartners for the purpose of helping to governsupply chain activities. In this manner, CPFRcreates a significant, direct link between the and the supply chain. prettythings 16. The CPFR initiative begins with the sharingof marketing plans between trading partners.Once an agreement is reached on the timingand planned sales of specific products, and acommitment is made to follow that planclosely, the plan is then used to create aforecast, by stock-keeping unit, by week, andby quantity. The planning can be for thirteen,twenty-six, or fifty two weeks. 17. Order Fulfillment and OrderManagement Three critical elements of collaborative planningare collaborative demand planning, jointcapacity planning, and synchronized orderfulfillment. This type of planning improvesquality of the demand signal for the entiresupply chain through a constant exchange ofinformation from one end to the other that goeswell beyond traditional practices. The Order-Management system representsthe principal means by which buyers and sellerscommunicate information relating to individualorders of product. Effective order managementis a key to operational efficiency and customersatisfaction. prettythings 18. Collaborative PlanningCollaborative demandplanningSynchronizedOrder fulfillment Joint Capacity planning 19. Order Management Functions Receive order Enter order manual/electronic Verify and check order for accuracy Check credit Check inventory availability Process back order Acknowledge order Modify order Suspend order Check pricing and promotion Identify shipping point Generate picking documents Originate shipment Inquire order status Deliver order Measure service level Measure quality of service 20. Order and Replenishment CyclesWhen referring to outbound-to-customer shipments, we typically use the term order cycle. The term replenishment cycle is used more frequently when referring to the acquisition of additional inventory, as in materials management. Basically one firms order cycle is anothers replenishment cycle.Major components of Order CycleOrder Order OrderOrderplacement processing preparationshipment 21. Order Placement Order-placement time can varysignificantly, from taking days or weeks to beinginstan