Sec 2 - Demand Management Flashcards
What are the 4Ps of Marketing Mix?
Product, Price, Promotion, Place
What are Product marketing decision examples?
Design, quality, cost, flexibility, features, variety, sizes, brand name, return, service, warranty policies, etc
What are Price marketing decision examples?
Commodity or premium price, market penetration price, loss leader, discounts, credit terms, allowances, etc
What are Promotion marketing decision examples?
Sales promotions, advertising, campaigns, and public relations, etc
What are Place marketing decision examples?
Sales channels, delivery mode/speed/dependability/flexibility, distribution inventory policy, etc
What is an Order Qualifier?
Characteristics the product/service must have to be a viable competitor in the marketplace
What is an Order Winner?
Characteristics that cause customers to chose a product over competitor’s products
What is the Voice of the Customer?
Actual customer descriptions in words for the functions an features customers desire for goods and services
Define Customer Relationship Management (CRM)
Collection and analysis of information designed for sales and marketing decision support.
To understand and support existing and potential customer needs.
Includes account management, catalog and order entry, payment processing, credit and adjustments, and other functions
What is Demand Planning?
Process of combining statistical forecasting techniques and judgment to construct demand estimates for products from the supplier’s raw materials to the consumer’s needs
What is Independent Demand
the demand for an item that is unrelated to the demand for other items
What is Dependent Demand
Demand that is directly related to or derived form the bill of materials (BOM) of other items or end products. Demand is calculated and does not need to be forecasted
What are 5 common sources of demand?
Forecast
customer orders
replenishment orders (from distribution centers)
Interplant transfers
Other (i.e. marketing or promotion samples)
What are the 4 basic demand patterns?
Trend, Seasonal, Random, Cyclical
What is Stable Demand? What is Dynamic Demand?
Stable demand patterns retain their general shape over time and are easier to forecast.
Dynamic are less predictable and make forecasting difficult.
What are the 4 major principles of Forecasting?
1) Forecasts are rarely ever 100% accurate
2) Every forecast must include an estimate of error
3) Forecasts are more accurate for families/groups of products
4) Forecasts are more accurate in the short term
What are the 3 major principles of data collection/preparation?
1) Record data in the terms needed for the forecast
2) Record the circumstances relating to the data
3) Record demand separately for different customer groups
Define Qualitative forecasting techniques?
Based on intuition and informed opinion. Subjective.
Define Quantitative forecasting techniques?
Extrinsic. Based on the idea of correlation and on cause/effect. Rely on external indicators to make the projections/forecast.
I.E. Housing starts influence the forecast of appliance, carpeting, etc
What are the 2 main indicating groups for Quantitative demand forecasting?
Economic– i.e. housing starts, military contracts, commercial aircraft orders
Demographic– i.e. changes in birth rate, age distribution, income/education levels, ethnicity
What 2 principles are used for Moving-Average Forecasts?
1) Demand is stable with little trend or seasonality
2) Past demand fluctuations are due to random variation
What is the logic behind Moving-Average Forecasts?
The average demand from the past 3 to 6 months is used to forecast demand for the next month.
What is the logic behind Exponential Smoothing?
1) Take the old forecast and the demand for the most recent period.
2) Assign a weighting factor (smoothing constant) to the last period’s demand
3) Calculate the weighted average of the old forecast and the latest demand
What is the formula for the Exponential Smoothing?
New forecast = weighting factor X latest demand + (1 - weighting factor) X previous forecast
How to select a smoothing constant?
Requires analysis of demand patterns and judgment. A low value gives more weight to the old forecast.
How to forecast for a Seasonal demand pattern?
1) Calculate a seasonal index of demand for each period.
2) Develop de-seasonalized demand by developing forecast for and entire year and divide it by the number of periods being forecasted.
3) For each period multiply the de-seasonalized demand by that period’s seasonal index.
What is the formula for a Seasonal Index?
period average demand / average demand for all periods
What is the formula for deseasonalized demand?
annual forecast / number of periods
What is the formula for the Seasonal forecast?
Expected period demand = seasonal index X deseasonalized forecast demand
Define Forecast Bias
Consistent deviation from the mean in one direction (high or low).
Define Mean Absolute Deviation (MAD)
The average of the absolute values of the deviations of observed values from some expected value
What is the formula for Forecast Error?
actual period demand - forecasted period demand
What is the formula for Mean Absolute Deviation (MAD)?
Total forecast error for all periods / number of periods
