Chapter9

PlanningSupplyandDemand

inaSupplyChain:ManagingPredictableVariabilitySupplyChainManagement

(3rdEdition)

9-1OutlineRespondingtopredictablevariabilityinasupplychainManagingsupplyManagingdemandImplementingsolutionstopredictablevariabilityinpractice2RespondingtoPredictableVariabilityinaSupplyChainPredictablevariabilityischangeindemandthatcanbeforecastedCancauseincreasedcostsanddecreasedresponsivenessinthesupplychainAfirmcanhandlepredictablevariabilityusingtwobroadapproaches:Managesupplyusingcapacity,inventory,subcontracting,andbacklogsManagedemandusingshort-termpricediscountsandtradepromotions3ManagingSupplyManagingcapacityTimeflexibilityfromworkforceUseofseasonalworkforceUseofsubcontractingUseofdualfacilities–dedicatedandflexibleDesigningproductflexibilityintoproductionprocessesManaginginventoryUsingcommoncomponentsacrossmultipleproductsBuildinginventoryofhighdemandorpredictabledemandproducts4Inventory/CapacityTrade-offLevelingcapacityforcesinventorytobuildupinanticipationofseasonalvariationindemandCarryinglowlevelsofinventoryrequirescapacitytovarywithseasonalvariationindemandorenoughcapacitytocoverpeakdemandduringseason5ManagingDemandPromotionPricingTimingofpromotionandpricingchangesisimportantDemandincreasescanresultfromacombinationofthreefactors:Marketgrowth(increasedsales,increasedmarketsize)Stealingshare(increasedsales,samemarketsize)Forwardbuying(samesales,samemarketsize)6DemandManagementPricingandaggregateplanningmustbedonejointlyFactorsaffectingdiscounttimingProductmargin:Impactofhighermargin($40insteadof$31)Consumption:Changingfractionofincreasecomingfromforwardbuy(100%increaseinconsumptioninsteadof10%increase)Forwardbuy7Off-Peak(January)Discount

from$40to$39Cost=$421,915,Revenue=$643,400,Profit=$221,4858Peak(April)Discount

from$40to$39Cost=$438,857,Revenue=$650,140,Profit=$211,2839JanuaryDiscount:100%IncreaseinConsumption,SalePrice=$40($39)Off-peakdiscount:Cost=$456,750,Revenue=$699,56010Peak(April)Discount:100%IncreaseinConsumption,SalePrice=$40($39)Peakdiscount:Cost=$536,200,Revenue=$783,52011PerformanceUnder

DifferentScenarios12FactorsAffecting

PromotionTiming13FactorsInfluencingDiscountTimingImpactofdiscountonconsumptionImpactofdiscountonforwardbuyProductmargin14ImplementingSolutionstoPredictableVariabilityinPracticeCoordinateplanningacrossenterprisesinthesupplychainTakepredictablevariabilityintoaccountwhenmakingstrategicdecisionsPreempt,donotjustreactto,predictablevariability15SummaryofLearningObjectivesHowcansupplybemanagedtoimprovesynchronizationinthesupplychaininthefaceofpredictablevariability?Howcandemandbemanagedtoimprovesynchronizationinthesupplychainint