Chapter 12 Flashcards
Demand Planning
the combined process of forecasting and managing customer demands to create a planned pattern of demand that meets the firm’s operational and financial goals
Demand Forecasting
a decision process in which managers predict demand patterns
Demand Management
a proactive approach in which managers attempt to influence the pattern of demand
Cost of Overestimating Demand (3)
holding costs
excess inventory costs
wages
Cost of Underestimating Demand (3)
lost sales
lower product availability
lost goodwill
Information Sources for Forecasting (3)
historical demand figures
business and economic metrics
management judgement
Components of Demand Management (3)
Pricing
Promotion
Order Scheduling
Patterns of Demand (4)
Stable
Seasonality, or Cycles
Trend
Shift, or Step
Autocorrelation
the correlation of current demand values with demand values
Forecast Error
the difference between a forecast and the actual demand
Five Steps in Forecasting Process
- Define Users and Processes
- Identify Data Sources
- Select Forecasting Techniques
- Document Techniques
- Monitor and Improve the Process
Grassroots Forecasting
a technique that seeks inputs from people who are in close contact with customers and products
Delphi Method
forecasts developed by asking a panel of experts to individually and repeatedly respond to a series of questions
Time Series Analysis Models
forecasting models that compute forecasts using historical data arranged in the order of occurrence
Naive Model
a simple forecasting approach that assumes that recent history is a good predictor of the near future
Weighted Moving Average
a forecasting model that assigns a different weight to each period’s demand according to its importance
Exponential Smoothing Model =
Ft+1 = Ft + alpha (dt - Ft)
Exponential Smoothing (def.)
a moving average approach that applied exponentially decreasing weights to each demand that occurred farther back in time
Regression Analysis
a mathematical approach for fitting an equation to a set of data
Seasonal Index
an adjustment factor applied to forecasts to account for seasonal changes or cycles in demand
Simulation Models
sophisticated mathematical programs that offer forecasters the ability to evaluate different business scenarios that might yield different demand outcomes
Focused Forecasting
a combination of common sense inputs from frontline personnel and a computer simulation process
Forecast Bias
the tendency of a forecasting technique to continually over predict or under-predict demand.
Mean Percent Error (MPE)
average error represented as a percentage of demand
Tracking Signal
the ratio of a running total of forecast error to MAD that indicates when the pattern of forecast error is changing significantly
Adaptive Forecasting
a technique that automatically adjusts forecast model parameters in accordance with changes in the tracking signal
Three “Rules” of Situational Forecasting
- Short-term more accurate than long-term
- Aggregate demand more accurate than isolated
- Multiple sources of data more accurate
Three Tactics of Demand Management
- Pricing changes, promotions, etc.
- Manage timing of order fulfillment
- Substitution of products, providers
Postponable Product
product designed so that it can be quickly configured to its final form quickly and inexpensively once actual customer demand is known
Collaborative Planning, Forecasting, and Replenishment (CPFR)
a method by which supply chain partners periodically share forecasts, demand plans, and resource plans in order to reduce uncertainty and risk in meeting customer demand
