Module 4: Capacity Planning and Demand Management Flashcards
An approach to forecasting that is based on intuitive or judgmental evaluation. It is used generally when data is scarce, not available, or no longer relevant. Common [types…] include personal insight, sales force estimates, panel consensus, market research, visionary forecasting, and the Delphi method. Examples include developing long-range projections and new product introductions.
qualitative forecasting techniques
Business being conducted between businesses and final consumers, largely over the internet. It includes traditional brick and mortar businesses that also offer products online and businesses that trade exclusively on the internet.
business-to-consumer sales (B2C)
Business conducted over the internet between businesses. The implication is that this connectivity will cause businesses to transform themselves via supply chain management to become virtual organizations—reducing costs, improving quality, reducing delivery lead time, and improving due-date performance.
business-to-business sales (B2B)
General upward or downward movement of a variable over time (e.g., demand, process attribute).
trend
An approach to forecasting where historical demand data is used to project future demand. Extrinsic and intrinsic techniques are typically used. See: extrinsic forecasting method, intrinsic forecasting method.
quantitative forecasting techniques
A forecasting method that projects historical data patterns into the future. Involves the assumption that the near-term future will be like the recent past.
time series forecasting
The business function that attempts to predict sales and use of products so they can be purchased or manufactured in appropriate quantities in advance.
forecasting
A fluctuation in data that is caused by uncertain or random occurrences. See: random events.
random variation
A consistent deviation from the mean in one direction (high or low). A normal property of a good forecast is that it is not [affected by this]. See: average forecast error.
bias
The difference between actual demand and forecast demand. [It] can be represented several different ways: mean absolute deviation (MAD); mean absolute percentage error (MAPE); and mean squared error (MSE). See: mean absolute deviation (MAD), mean absolute percentage error (MAPE), mean squared error (MSE).
forecasting error
Uses one or more variables that are believed to affect demand in order to forecast future demand.
associative forecasting
An extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being backordered to being excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving product down the chain. [This] can be eliminated by synchronizing the supply chain.
bullwhip effect
A predictable repetitive pattern of demand measured within a year where demand grows and declines. These are calendar-related patterns that can appear annually, quarterly, monthly, weekly, daily and/or hourly. Syn: seasonal variation. See: base series.
seasonality
The ratio of the cumulative algebraic sum of the deviations between the forecasts and the actual values to the mean absolute deviation. Used to signal when the validity of the forecasting model might be in doubt. See: forecast error, mean absolute deviation.
tracking signal
The process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services (both high and low volume; lumpy and continuous) across the supply chain from the suppliers’ raw materials to the consumer’s needs. Items can be aggregated by product family, geographical location, product life cycle, and so forth, to determine an estimate of consumer demand for finished products, service parts, and services. Numerous forecasting models are tested and combined with judgment from marketing, sales, distributors, warehousing, service parts, and other functions. Actual sales are compared to forecasts provided by various models and judgments to determine the best integration of techniques and judgment to minimize forecast error.
demand planning
Syn: resource planning.
resource requirements planning
Capacity planning conducted at the business plan level. The process of establishing, measuring, and adjusting limits or levels of long-range capacity. [This] is normally based on the production plan but may be driven by higher-level plans beyond the time horizon of the production plan (e.g., the business plan). It addresses those resources that take long periods of time to acquire. [Decisions based on this] always require top management approval.
resource planning
A process that weighs both customer demand and a firm’s output capabilities, and tries to balance the two. Demand management is made up of planning demand, communicating demand, influencing demand, and prioritizing demand.
demand management process
1) The function of recognizing all demands for goods and services to support the marketplace. It involves prioritizing demand when supply is lacking. [This] facilitates the planning and use of resources for profitable business results. 2) In marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs.
demand management
Forecasting the demand for a particular good, component, or service.
demand forecasting
1) A collaboration process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final products to end customers. Collaboration encompasses business planning, sales forecasting, and all operations required to replenish raw materials and finished goods. 2) A process philosophy for facilitating collaborative communications. [It] is considered a standard, and is endorsed by the Voluntary Interindustry Commerce Standards. Syn: collaborative planning.
collaborative planning, forecasting, and replenishment (CPFR)
A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. [This] is performed at least once a month and is reviewed by management at an aggregate (product family) level. The process must reconcile all supply, demand, and new product plans at both the detail and aggregate levels and tie to the business plan.
Sales and Operations Planning
Techniques that deal with analysis and planning of logistics and manufacturing during short, intermediate, and long-term time periods. [This] describes any computer program that uses advanced mathematical algorithms or logic to perform optimization or simulation on finite capacity scheduling, sourcing, capital planning, resource planning, forecasting, demand management, and others. These techniques simultaneously consider a range of constraints and business rules to provide real-time planning and scheduling, decision support, available-to-promise, and capable-to-promise capabilities. [This] often generates and evaluates multiple scenarios. Management then selects one scenario to use as the “official plan.” The five main components of [these] systems are (1) demand planning, (2) production planning, (3) production scheduling, (4) distribution planning, and (5) transportation planning.
Advanced scheduling and Planning
A report that lists or flags only those items that deviate from the plan.
exception report
The quantity planned to be received at a future date as a result of a planned order release. [These] differ from scheduled receipts in that they have not been released.
planned order receipt
A suggested order quantity, release date, and due date created by the planning system’s logic when it encounters net requirements in processing MRP. In some cases, it can also be created by a master scheduling module. [These] are created by the computer, exist only within the computer, and may be changed or deleted by the computer during subsequent processing if conditions change. [While at one level, these] will be exploded into gross requirements for components at the next level. [Along with released orders, these] serve as input to capacity requirements planning to show the total capacity requirements by work center in future time periods.
planned order
