Customer orders, Forecasting processes Flashcards
What does a Customer Order represent?
A commitment from a customer to purchase certain quantities of a company’s products at a certain point in time.
The steps that the customer goes through to place an order for a product/service.
What is the goal of the Customer Order Process?
To ensure that the customer receives the product/service they want in a timely & satisfactory manner while minimizing errors & delays in the ordering & delivery process.
What is “tacit acceptance”?
A procedure used in some cases instead of order confirmation.
The customer order may automatically be considered as confirmed if the supplier has not been in contact within a certain time period.
What must be included in the information about demand?
- A quantity dimension (quantities to be
delivered) - A time dimension (the times at which
deliveries will take place
Define “Available quantities” (determining a delivery plan).
The quantity which at a given point in time can be delivered from stocks without negatively impacting on other customers’ deliveries.
How do you determine the delivery time for standard products?
By calculating the earliest time at which there are available quantities to promise for delivery.
What is ATP?
“Available to promise”, calculation of what is available for delivery.
What is a reservation?
A booking of a certain quantity for delivery at a later date.
How could you determine the delivery time for a customer-order-specific product?
By continuously updating current production capacity as orders are received. Real-time information is obtained on how much capacity is available for further customer orders.
When a new order is received, a calculation of the number of hours required to manufacture the product ordered is made & when they will earliest be available in the production groups used for the manufacture.
When can the customer order be delivered with respect to materials availability?
The time when the items incorporated which are last available will determine when the work order attached to the customer order can be started, plus the lead-time for manufacturing.
What is the disadvantage and advantage of fixed delivery time?
Disadvantage: They must always be sufficiently long to work when the workload is temporarily higher than normal.
Advantage: The principle is simple to apply & the delivery times can be very quickly given to potential customers.
When is the picking list printed?
When the delivery time for a customer order arrives & products ordered are in stock ready for delivery.
What does “Part delivery” mean?
A certain proportion of the quantities promised are noted as back-orders & delivered at a later date, while the quantity available is delivered immediately
What does a “delivery plan” consist of?
- A “call-off” for delivery & may be considered as a clear order from the customer.
- A fixed part of the delivery plan & may not
be changed by the customer (not without
good reason) from 1 delivery plan to the
next. - A type of unfilled order (may be seen as a
reservation). - Defines delivery times for the supplier.
- A fixed part of the delivery plan & may not
- “Expected call-offs”: Material supply commitment
- Not a full & fixed commitment from the
customer for actual sub-orders.
- Not a full & fixed commitment from the
- “Forecast” of needs for future deliveries based on customers’ assessments.
- No commitment
What are some common reasons for low forecast accuracy?
- Ineffective forecasting methods
- Misleading forecast data
- Not sufficiently combining automatic
forecasting & manual assessments - Unrealistic expectations
- Low acceptance level
- Conflicting interests
- Lack of forecast responsibility & “forecast
monitoring”
How could you achieve higher forecast accuraccy?
By combining manual future assessments.
Ex: At the product group level: with automatic calculations based on historic facts.
Name a few demand patterns.
- Random variations around a mainly
unchanging demand - Trend variation: when demand
increases/decreases period by period - Seasonal variation: the demand varies
regularly at different times of the year
When forecasting several years ahead:
- Cyclical demand variation: depends more on general changes in the business circle
Explain “Qualitative methods”.
Qualitative methods:
- Generally based on individuals’ experiences
& well-considered personal assessments of
future demand
- Characterised by few/no formal calculations
on the basis of demand statistics & other
data
Ex: Simple intuitive estimates by a sales manager or detailed formal procedures & approaches with many individuals involved
When is Qualitative methods prefered?
- Small number of products & periods to be
forecasted - If it’s necessary to make them far in advance
- Demand is influenced to a large extent by
the company’s various marketing activities
In general: For products being introduced on the market or being discontinued.
What is the difference between “intrinsic” & “extrinsic” Quantitive methods.
Intrinsic: expressed in the same variable as the time series calculations are based. Ex: both refer to sales of a certain product.
Extrinsic: based on rime series that refer to some other explanatory variable than the one to be forecast. Ex: demand for electric cable is dependent on housing construction while demand for ice cream is dependent on weather.
What are 2 commonly occurring intrinsic quantitative methods for operative forecasting? Explain them.
Moving average: Calculating the average value of demand during a number of periods as a measurement of demand in future periods.
- Demand values based on many periods will
provide better stability but also poorer
sensitivity to trends etc.
- Longer forecast periods => Fewer periods
need to be included
- “Successive replacement of the oldest
period’s demand value with that of the
latest”
- All demand values are assigned the same
weight in calculations
Exponential smoothing:
Explain the customer order process for “standard products”?
- The supplier registers the sales order directly in its business system
- Upon registration, the products time/quantity are reserved for the order
- Picking + delivery or manufacturing/assembly + delivery
Explain the customer order process for “customer-specific products”?
- They must be specified by the customer (“Product configurators”)
- Production orders are created
- Manufacturing order created => Incoming semi-finished products & components are reserved
- Manufacturing + Delivery
