[6] Managing flow variability Flashcards
What is forecasting?
Forecasting in operations management refers to the process of estimating or predicting future demand, resource requirements, or other relevant factors to support decision-making and planning.
Why is forecasting used?
it helps organizations anticipate and prepare for future demand, allocate resources efficiently, make production and inventory decisions, and formulate strategies to meet customer needs effectively.
What is ‘noise’?
Unpredictable variation in demand that comes from random factors
Long-range forecasts are.. more/less accurate than short-range forecasts?
Less accurate
Aggregate forecasts are.. more/less accurate than individual forecasts?
More accurate
What is demand aggregation?
Aggregating demand helps firms to reduce demand uncertainty
—> It involves aggregating the demand from multiple customers, locations, or channels to achieve economies of scale, optimize supply chain operations, and enhance purchasing power.
What is postponement/delayed differentiation?
Reorganising a process in order to delay the differentiation of a generic product to specific end-products closer to the time of sale
Safety inventory def
Inventory that is in excess of avg (forecast) demand
Denoted: Isafety
Service level measure def
The probability that there will be no stock out within a time interval
What is LTD?
Lead Time Demand = the time until an order arrives
—> usually during this time there is uncertain demand
Formula to find service level
Service level - 1-P(stockout)
The larger the safety inventory ..
The larger the service level
(And vice versa)
the larger the demand uncertainty..
The lower the service level
(And vice versa)
