The biggest challenge in Demand Management?
Most clients we speak to accept that there is not enough effort spent to establish a proactive Demand Plan but rather they often simply aggregate the customer forecasts into monthly buckets – or worse keep the previous one – as an input for the Supply Plan!
This increases the bullwhip effects and logistics then spend most of the time chasing orders and supplies, changing priorities and significantly increasing inventory with a negative impact on the On-Time-Delivery (OTD) performance.
The result? Long fulfilment lead-times resulting in order delays or even loss of Sales.
Manufacturing companies put huge effort into the production plan as part of the M.P.S (Master Production Schedule) and bearing in mind the focus and accuracy of the available details for the M.R.P (Manufacturing Requirement Planning) it is not surprising that the result is poor when indeed the demand plan is not realistic!
The result? Operational performance is weak and the company is now under pressure.
Without accuracy in planning the value add for the company is wasted due to daily changes in the production planning and constant follow up of supplier deliveries, as well as frequent meetings trying to follow unplanned orders.
The result? Inventory turn becomes low, meaning that the ROI invested in fulfilling orders is too low and money wasted on funding the demand plan discrepancy. Worst of all, unnecessary inventory built or unused and raw material purchased can become obsolete and the financial impact is a direct write-off for the company.
As a high-level summary, inefficient demand planning results in order delays which impacts cash collection, loss of sales, high inventory and obsolescence which can lead to thousands of dollars lost.
So how do you deliver on a successful strategy for Demand Planning?
Firstly, this must be a continuous process:
- Aggregate the customer forecasts, planned orders and backlog. Review the gaps, duplication of forecast in the past or in the frozen period (usually within the standard order lead-time).
- Review and build a draft demand plan under the demand buckets
a. Determine the market opportunities: trend, seasonality, new customer expectations, evolving competition, new products introduction, in order to find the best demand areas
b. Determine the optimum product mix and customer mix to achieve a sustainable growth in the target demand areas
c. Determine the sales & marketing tactics to stimulate the demand in target demand areas: promotion, special events, price revision, distribution channel.
- Communicate the Demand Plan to the Company:
a. Supply Team: review demand plan in units to review capacity, efficiency and resources requirements
b. Finance team: review the assumption, product mix and turnover
c. Product team: review the product mix, new product introduction, product life cycles and demand plan in units
- Continuing Review:
a. Review the assumptions taken
b. Adjust the priorities
c. Adjust the demand plan according to the scenario amended
d. Demand management activities
If material and capacity resources are to be planned effectively, all sources of demands must be identified. Demand management includes 4 major activities:
- Forecasting
- Order processing
- Making delivery promises
- Interfacing between manufacturing planning and control and the marketplace.
MYOB Advanced features a fully integrated Advanced Manufacturing Software delivering a powerful and complete solution for make-to-stock, make-to-order, engineer-to-order, project-centric, job shop, batch, and repetitive manufacturing companies. MYOB Advanced provides real-time coordination of all your business activities from one central location.
Let us help you Make Better Manufacturing Decisions! Call us today for more information.
