Bharati Vidyapeeth College of Engg.

,
Kharghar, Navi Mumbai.
ACADEMIC YEAR 2009-10

SEMINAR REPORT ON

DEMAND MANAGEMENT
Demand Management in manufacturing planning and
control system.

CLASS: B.E. MECH -B

Submitted by
PRASHANT P. TAKSALE
4735

BHUPESH G. SANKHE
4730

SUBJECT TEACHER
H.O.D

DEPARTMENT OF MECHANICAL ENGG.

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 DEMAND MANAGEMENT

Demand Management in manufacturing planning and control

system.

INTRODUCTION
Demand management activities are widely scatted throughout the
firm. Marketing and sales departments have a big role to play in it. Physical
distribution and customer service departments do some activities. Some
companies have set up supply chain management departments to
coordinate demand management activities. A well managed system must
clearly assign responsibilities to make sure nothing is left to chance.

The data produced in the demand management module must be accurate,

timely, and appropriate to facilitate proper decision making in manufacturing
planning. Discipline is required and is to be enforced in the system to ensure
accuracy of the data.

Make-to-Knowledge: A manufacturing facility has a pipe of capacity

which is filled with customer orders in the short run and forecasted orders in
the long. Whenever actual orders come, the forecasted orders are
consumed with actual orders. The performance of manufacturing is
improved when partnerships are created in the supply chain and knowledge
of the supplier is increased about a customer’s need. Vendor managed
inventories at customer end is an example of such partnership. In such
partnerships, the Point-of-Sale (POS) data are electronically passed to the
suppliers and supplier knows the inventory on the shelf in real time.

Detailed product mix is required for shop floor control (Master

production scheduling) where as demand information at higher level is

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sufficient for annual plans or manufacturing planning (Sales and Operations
planning).

Demand management is concerned with identifying all sources of

demand for manufacturing capacity apart from regular sales of the product.
The additional sources of demand can be service-part requirement, intra-
company requirements, promotional inventory buildup, pipeline inventory
buildup etc. All potential demands sources are to be contacted and
information is to be gathered from them assess demand in the future
planning period.

Demand Management and production

planning.

Demand Management Module

Demand management (demand assessment) is a module in

manufacturing planning and control system (MPC). In this module, all
potential demands on manufacturing capacity are collected and coordinated
for developing manufacturing plans. Demand management module activities
include determining or estimating the demand from customers and from
within the company or organization, balancing demand and supply, order
booking and determining promised delivery dates.

A) Demand management in MPU system.

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 Resource Production Market
planning planning places

Demand
Manageme
nt

Master production
schedule

Demand management encompasses forecasting, order entry,

order delivery, date promising, customer order services, physical distribution
& other sources of demand for manufacturing capacity. Include care services
part demands, intra company requirements & pipeline inventory stocking .All
qualities and timing for demand must be planned and controlled.
Demand management depend upon all the aspect of
manufacturing process, unit & planning of production. Above fig. we come to
know that relation between all aspect and Demand Management

B) Demand Management & Production planning

The exact link of demand management and production planning
depends to some extent on the way in which production planning is done in
way firm. If the production plan is a quarterly statement of output in any
financial measure, then key requirement for demand planning is for
synchronizations with this target. If the delivery timing for significant
customer order is late it will affect the production plan. Similarly major

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change in distribution & inventory policy might influences on production
plane.
All source of demand must be taken into account. It also include in
production plan to provide synchronation with other MPC activity. The
interaction of demand management and MPC are frequent & detailed. In all
instants the underlying concept is that of demand being consumed over
timed by actual customer order.
In each company environment the objective in the demand
management module is to bridge the firm the customer. Every company
applied different type of demand planning on basis of customer requirement.
Demand management task of specified all sources of demand on facility
imparts master production scheduling in several ways. Some of the sources
will be handled directly in master production schedule, such as pipeline
inventory buildup, special exhibition requirement & inter part transfer.

To adequately performance rough cut capacity planning, the service

part demand will have to be included. This could be done on rough basis
by estimating services part demand in monitoring unit. Demand
management is a gateway module in MPC and it links manufacturing
facilities to the market and physical distribution system of the company

A) DEMAND MANAGEMENT AND

FACTORS.

Out bond product flow

Distribution activities are planned on basis of information

developed in demand management function. Customer delivery
promises data, inventory resupply, shipment, interplant shipment and
so on. are all used to developed short term transportation schedule can

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 be interpreted with distribution planning as well. the information can be
used to plan and control warehouse supply .transportation capacity and
other recourses within which days to day distribution function will
operate can be also better planned and controlled with the information.
As changed occur in market place, demand management can and
should routinely pick up, indicating when managerial attention is
required.

It’s in demand management that service level and resultant safely

stock are expired defined. The master scheduler is then responsible for
maintains the required level of buffer stock and timing.

Data Capture

The data capture and monitoring activity of demand management fall

into two brode categories 1.ovarall market

2. Product mix

The activity most appropriate for production planning is basic market trends
and pattern. The data should corresponds to the units used in
production planning ,the intent is to determine on an ongoing basis ,the
general level of actual business for input to the production planning
process.

For both the overall market and the detail product mix ,its important
that demand data be capture where possible. Many companies use
sales instead of demand for purpose of making demand projections.
Unless all demand have been satisfied, sales, can understate the actual
demand.

Dealing with day to day customers orders

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 A primary function of the demand management module is
converting specific day to day customer orders into detailed MPC
action .its through the demand management function that the actual
customer demands in to production action must be preformed
regardless of whether the firm manufacturing make to stock ,make to
order. The detail may be somewhat, depending on the nature of the
manufacture condition in the company.

In the make to order environment, the primary activity is control

of customer orders in order to meet customer delivery dates. This must
be related to master production schedule to determine impact of any
engineering change on final customer requirement.

In make to stock environment, demand management does not

ordinary provide promises date, since material is in stock the customer
most often to inventory.

Demand Management techniques

Appropriate Forecast Information

For strategic decision of setting up new plants etc. highly

aggregated estimates of general business trends over long term are made.
Top management is heavily involved in the development of these estimates.

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Economic growth models and management judgment are used in developing
these estimates. Using the economic growth models will lead to improved
forecasting and helps neutralize any emotional attachment of decision
makers to their proposals.

The forecasts needed for sales and operations planning are in units
of product families. Customer plans are an important input into the
forecasting exercise at this level. Current trends are captured and any
marketing plans to influence demand are also included in developing the
forecasts.

Forecasting required for master production scheduling (MPS) uses

statistical or mechanical procedures that use past data. But managers can
review the estimates given by the mechanical rules and modify them when
required in light of their specific knowledge regarding market conditions
which the statistical model cannot capture. In furcating basically looked at
evidence from comparative empirical studies to identify methods that can be
useful for predicting demand in various situations and to warn against
methods that should not be used. In general, use structured methods and
avoid intuition, unstructured meetings, focus groups, and data mining. In
situations where there are sufficient data, use quantitative methods
including extrapolation, quantitative analogies, rule-based forecasting, and
causal methods. Otherwise, use methods that structure judgement including
surveys of intentions and expectations, judgmental bootstrapping,
structured analogies, and simulated interaction. Managers’ domain
knowledge should be incorporated into statistical forecasts. Methods for
combining forecasts, including Delphi and prediction markets, improve
accuracy. We provide guidelines for the effective use of forecasts, including
such procedures as scenarios. Few organizations use many of the methods
described in this paper. Thus, there are opportunities to improve efficiency
by adopting these forecasting practices.

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 1. Forecasting Methods

2.1 Aggregating Forecasts

Aggregate forecasts are to be developed to provide forecasts to

support higher levels of planning. Also aggregate forecasts help in
evaluating detailed forecasts of individual items. Aggregating individual
products into product lines, geographical areas, or customer types must be
done in ways that are compatible with the planning systems. The groups
must make sense to forecasters.

Pyramid forecasting a name given to a method where in forecasts at

lower levels are combined and compared with higher level aggregate
forecasts up to the level of company or the business unit and planning
decisions are taken. Then the top level determined plan is forced down
reconciling higher level aggregate forecast and the lower level summed up
forecasts.

Often forecasting is prepared for variety of business decision by many

different people in the company. One mean of providing consistent of
forecasting for various purposed in through the billed of material (BOM).
Demand fence planning
Using
fenceBOM pull the forecasting.

Make to order

Assemble to order
B) Demand Management. Production scheduling

Make to
Stock
Forecasting order

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2.2 Make to stock demand management

Provide adequate inventory to meet the need of customers

throughout the distribution system,& maintain desired customer services
level ,required detailed forecasting . Deposited our arguments for the
increase accrued of aggregate forecasting the need in make to stock
situation is for item level forecasting by location and by time period.

The use of safety stock in inventory is quite common .less common is

the safety lead time. In instances of where the finished product is
transported to distant inventory location such as warehouse & distribution
center. There is often range of time during which delivery can be taken
places.

 Key focus is MAINTENANCE of FGI.

 TRACKING of demand by location throughout the supply chain is an
important activity.

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 Key issue is HOW, WHEN & HOW MUCH, to REPLENISH STOCK at a
specific location (physical distribution concern).
 Firms employ distribution centers, warehouses, and even vendor-
managed inventory inside their customer’s location.
 Managers require information on the INVENTORY STATUS in the
various locations, relationships with transportation providers, and
estimates of demand by location and item (forecasting).
 Satisfying customers requires BALANCING the level of inventory
against the level of service to the customers. A trade-off between the
inventory costs and the level of service must be made.
 IMPROVEMENTS can be made by having better knowledge of demand,
+ rapid transportation alternatives, speedier production, more
flexibility

1.3 Assemble to order demand

In assemble to order environment basically about making

accurate promises dates to customer are taken. This requires MPS
stability and predictability .t the focus on stability in information in the
system and MPS should not be taken as an argument for inflexibility. For
assemble to order product the use of heading provide as effective, easily
managed buffering tech.

Selecting the fences managing customer orders and deciding

hedge quality depend on both ,economics trade off and current condition
setting the time fencing too early means that the inventory will be carried
at higher level in the product structure ,which often decrease alternative
use of basic material.

 The primary task of Demand Management is to DEFINE THE

CUSTOMER’S ORDER in terms of alternative components and options.

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 It is important that they be COMBINED into a viable product in a
process known as configuration management.
 One of the capabilities required for success is ENGINEERING DESIGN
that enables as much flexibility as possible in combining components,
options, and modules into the finished products
 In this environment the independent demand for the assembled items
is TRANSFORMED into dependent demand for the parts required to
produce the components needed.
 The inventory that defines customer service is the inventory of
COMPONENTS not finished products.

1.4 Make to order demand management

In this type of demand very much concerned with the control

of customer order after they are entered in to the system. In this case
demand management has to track these order through all phase of plant
activity, include the engineering related functions. Through that there
three different taking reason depend upon situation which carried out.

To forecast using quantitative analogies, ask experts to

identify situations that are analogous to the target situation and for which
data are available. If the analogous data provides information about the
future of the target situation, such as per capita ticket sales for a play that
is touring from city to city, forecast by calculating averages. If not,
construct one model using target situation data and another using
analogous data. Combine the parameters of the models, and forecast with
the combined model.

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 MOVING THE CUSTOMER decoupling point to raw material or even
suppliers reduces the scope of dependent demand information.
 The task of demand management in this environment is to
COORDINATE INFORMATION on customers’ product needs with
engineering.

 Demand management now includes determining HOW MUCH

ENGINEERING CAPACITY will be required to meet future customer
needs
 In these environments, suppliers’ capabilities may limit what we are
able to do, so COORDINATION with them is essential.
 This span of involvement from customer to supplier gives rise to the
term supply chain (or demand chain) and
 The coordination of activities along the supply chain is referred to as
supply chain management

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 C)MANAGING DEMAND

In this section managerial issues related to the performances of day to

day demand management task are explained. And this is very important
in point of demand management.

1.1 organizing demand management

Many of the activity of demand management are already

performed in most companies in many instances the organization
responsibility for performances these activity is widely scattered through
the firm.

Company plans typically require the cooperation of many

people. An organization may decide to implement a given marketing
strategy, but will it be able to carry out the plan? Sometimes an
organization fails to implement a plan because of a lack of resources,
misunderstanding, opposition by key stakeholders, or a lack of
commitment by key people. The need to forecast organizational behavior
is sometimes overlooked and can be important. Better forecasting here
might lead to more realistic plans and to plans that are easier to
implement. Surveys of key decision makers in an organization may help
to assess whether a given strategy can be implemented successfully.
Simulated interactions can provide useful forecasts in such situations.

Without an efficient, proactive approach to resolve forecast

errors, managing exceptions can be time-consuming and costly. Our
Advanced Exception Management gives you the flexibility to adjust the
logic and business rules that govern the creation and management of

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 exceptions. This tool improves productivity by enabling automatic
detection and self-correction of many problems.

Demand management is a major concern in many industries

as companies realize the importance of creating an integrated
relationship with their suppliers and customers. Managing the Demand
chain has become a way of improving competitiveness by reducing
uncertainty and improving service. One aspect of successfully managing
the Demand chain requires that a company understand their logistical
strategies and practices.

3.2 Managing services level

Demand Management should be regarded as a fundamental

part of ‘best value for money’ asset management. It should be considered
whenever change in the community’s need for a service is forecast or when
a new service is contemplated. When adopted as part of strategic asset
management, Demand Management techniques create
Confidence in decisions relating to:
• Procurement of new assets;
• Refurbishment of existing assets;
• Management of existing assets, or
• Disposal of existing assets.
Key managers should be involved in the Demand Management procedure to
identify strategies, assess risk and make decisions. This involvement will
enable a clear understanding of the impact changes in the availability of
resources and services will have.
In particular, other agencies that may be affected should be included in the
process to ensure that demand is not simply shifted from one agency to
another.
The elements of managing service level include:
• Identifying, defining and measuring current and future service demand

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• Measuring current and future service capacity
• Measuring the gap between projected demand and capacity
• Identifying strategies to influence demand, including an assessment of the
potential impact of those strategies
• Performing a risk analysis
• Selecting a Demand Management strategy
• Implementing the strategy
• Monitoring its impact
• Reviewing its process and success.

The Unique Alternative to the Big Four®

Case Study No. 1:

PROBLEM
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 Company deploys demand planning technology without addressing

people, process, and change management. Inconsistent set of demand

and inventory planning practices

across North American business units.

Impact:

No buy-in or collaboration from key stakeholders (Sales,

Marketing, Finance, Advertising, and Supply Chain) and absence of single

number consensus forecast.

SOLUTION:

Demand management relaunched with focus on process and change

management. Facilitated process design and defined roles and

responsibilities.

Impact:

Forecast accuracy improved by more than 20 percent and

achieved single number consensus forecast through improved collaboration

and communication among key stakeholders.

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