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Chapter 7 Demand Management

Demand management aims to enhance collaboration between supply chain participants to better coordinate the flow of products, services, information, and funds. However, achieving this goal can be challenging due to a lack of coordination and an overemphasis on demand forecasts rather than collaborative efforts and strategic planning. Various fulfillment strategies can be used to balance supply and demand, including adjusting prices or lead times, utilizing production flexibility or safety stock, and collaboratively forecasting demand through methods like CPFR.

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64 views15 pages

Chapter 7 Demand Management

Demand management aims to enhance collaboration between supply chain participants to better coordinate the flow of products, services, information, and funds. However, achieving this goal can be challenging due to a lack of coordination and an overemphasis on demand forecasts rather than collaborative efforts and strategic planning. Various fulfillment strategies can be used to balance supply and demand, including adjusting prices or lead times, utilizing production flexibility or safety stock, and collaboratively forecasting demand through methods like CPFR.

Uploaded by

watthon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 7 Demand Management

Demand Management represents focused effort to


estimate and manage customer demand.
 The goal is to enhance ability of supply chain
participants to collaborate on the flow of product,
services, information, and funds.
 Challenges in achieving this goal:
 Lack of coordination

 Too much emphasis on demand forecasts, with


less attention on the collaborative efforts as well as
strategic and operational plans
Balancing Supply & Demand

 External balancing methods – change


manner customs orders to balance supply &
demand
 Price
 Lead time
 Internal balancing methods – utilize internal
process to manage supply/demand gap
 Production flexibility
 Safety stock
Sales & Operations Planning (S&OP)
 Run initial sales forecast
 Demand planning – sales/marketing to review
forecast and adjust for promotion & introduction of
new products
 Supply planning – operations to review different
options to match capacity to forecast
 Pre S&OP meeting – sales/marketing, operations,
and finance work to solve capacity issues by
balancing demand and supply; develop alternatives
 Executive S&OP meeting – top executives from
various functional areas agree on forecast and
convert that into operating plan
Collaborative Planning, Forecasting &
Replenishment (CPFR)
1. Develop front end agreement
2. Create joint business plan
3. Create sales forecast
4. Identify exceptions for sales forecast
5. Resolve/collaborate on exception items
6. Create order forecast
7. Identify exceptions for order forecast
8. Resolve/collaborate on exception items
9. Order generation
Direct-to-Customer (DTC) Fulfillment
 General Advantages:
 Low start-up costs
 Workforce efficiency from consolidated operations

 General Disadvantages:
 Order profile will change (store orders in case and/or
pallet quantities, consumer orders are in small
“eaches” quantities)
 “Fast pick,” or broken case operation must be added
to the distribution center
 Conflict between store priorities and DTC order
Integrated Fulfillment
 Retailer maintains both store and DTC presence
 Operates one distribution network serving both channels
 Advantage
 low start-up costs

 existing network can service both

 Disadvantages
 order profile will change with addition of DTC orders

 would require a “fast pick,” or broken case operation

 conflict might arise between store order & DTC order


Dedicated Fulfillment

 Store and Internet fulfillment by two separate


distribution networks
 Advantage:
 separate distribution network for store delivery and
direct consumer delivery eliminates most of the
disadvantages of integrated fulfillment
 Disadvantage:
 duplicate facilities and duplicate inventories
Outsourced Fulfillment

 Use an outside firm to perform fulfillment functions


 Advantages:
 low start-up costs to service the Internet channel

 possible transportation economies

 Disadvantage:
 loss of control over service levels
Drop-Shipped Fulfillment or Direct Store
Delivery

 Vendor delivers directly to retailer, bypassing


retailer’s distribution network.
 Works best for products that have a short shelf life
 Advantages:
 reduction of inventory in the distribution network

 vendor has direct control of its inventories

 Disadvantage:
 possible reduction of inventory visibility
Store Fulfillment
The order is placed through the Internet site and sent to
the nearest store for customer pick up
 Advantages:
 short lead time to the customer

 low start-up costs for the retailer

 returns can be handled through the store

 product availability in consumer units

 Disadvantages:
 reduced control and consistency over order fill

 conflict may arise between inventories

 must have real-time visibility to in-store inventories

 stores may lack sufficient space to store larger


product volume
Flow-Through Fulfillment
Product is picked and packed at distribution center, then
sent to the store for pickup
 Advantages:
 eliminates the inventory conflict

 avoids the cost of the “last mile”

 returns can be handled through the existing store


network
 Disadvantage:
 storage space at the store may be insufficient
Nordstrom’s DTC Fulfillment Center at Cedar Rapids, Iowa (Operated by 3PL )

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