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Demand Management
Session 2
2.
3.
4.
5.
Demand
Management
Master
Planning
Material
Requirements
Planning
Capacity
Management
and Production
Activity
Control
Aggregate
Inventory
Management
Item Inventory
Management
Purchasing
and Physical
Distribution
Lean/JIT and
Quality
Systems
Theory of
Constraints
and Review
Activity
6.
7.
Introduction to
Supply Chain
Management
22
8.
9.
10.
Learning Objectives
Upon completion of this session, participants will be
able to:
Demand Management Business Processes
Describe the significance of marketing management and
customer relationship management
Explain the role and objectives of demand planning (forecasting
and customer order management)
Characteristics of Demand
Differentiate independent from dependent demand
Identify at least five sources of independent demand
Recognize at least four demand patterns
23
Estimate Demand
Calculate and explain the logic of an exponential smoothing forecast
Explain the logic behind the calculation of a seasonal forecast
Calculate and explain the use of the mean absolute deviation
24
Demand Management
Session 2
Demand
Management
25
Marketing
Management
Demand
Planning
26
Customer
Relationship
Management
(CRM)
Marketing
Management
Potential Order
Qualifying and
Winning Products
Product
Price
Promotion
Place
27
Order Qualifying
and Order Winning
Products
28
Order Management
29
Demand Planning
Recognition of customer requirements through
Forecasts
Management of orders from
Internal customers
External customers
2 10
- Lilly Shanghai
- Validation Lots
- Patheon
Demand Management
Session 2
Characteristics
of Demand
2 11
MPS
MRP
2 12
Sources of Demand
Forecasts
Ex Lilly
Customer orders
Demand in BPCS
Interplant transfers
Transfer WA to WX
Other
Validation
2 13
Demand
Level
Quarters
2 14
Demand
Ceclor
Quarters
2 15
Demand
Quarters
2 16
Stable vs.
Dynamic
Demand
Stable
Average demand
2 17
Demand Management
Session 2
Forecasting
2 18
Introduction
Purposes and uses of the forecast
Principles of forecasting
Principles of data collection and preparation
2 19
Forecast
Business Planning
2 to 10 years
Physical units of
production at the
product family level
1 to 3 years
Physical units of
production at the end
item level
3 to 18 months
Master Scheduling
2 20
Principles of Forecasting
Forecasts
2 21
No data no Fcst.
Promotions, ..
2 22
6000
10
11
12
6000
500
500
500
500
500
500
500
500
500
500
500
500
Average
Forecast
1500
1500
1500
1500
1500
1500
1500
1500
1500
1500
1500
1500
2 23
12,000
6,000
18,000
1,500 per month
!!!
Demand Management
Session 2
Forecasting
Techniques
2 24
Forecasting Techniques
Forecasting Techniques
Qualitative
Quantitative
Judgment
Mathematics
Intrinsic
(Time Series)
2 25
Extrinsic
(Causal)
Qualitative Techniques
Are based on intuition and informed opinion
Tend to be subjective
Are used for business planning and forecasting for new
products
Are used for medium-term to long-term forecasting
Lilly Products?
2 26
Lilly Products?
2 27
Examples
Moving Averages
Exponential Smoothing
2 28
2 29
92
2 30
Feb
83
Mar
66
Apr
74
May Jun
75
Jul
84
84
81
75
Mo.1
Mo.2
Mo.3
63
91
84
Demand
102
91
95
Next Month
Forecast
288
96
Key: = Sum
2 31
MONTH 4 FORECAST
2 32
Mont
h
Demand
102
91
95
105
94
101
Three-Month
Total
Next Month
Forecast
2 33
Three-Month
Total
Next Month
Forecast
Month
Demand
102
91
95
288
96
105
291
97
94
294
98
101
300
100
3-Month
Total
Forecast
288
96
291
97
294
98
96
100
94
300
Forecast
102
Demand
Month
104
100
98
92
90
0
Period
2 34
2 35
Month
Demand
Three-Month Total
Next-Month
Forecast
89
272
91
89
272
91
94
272
91
91
274
91
95
280
93
104
290
97
106
305
102
110
320
107
2 36
Month
Demand
Six-Month Total
Next-Month
Forecast
89
545
91
89
544
91
94
549
92
91
546
91
95
552
92
104
562
94
106
579
97
110
600
100
2 37
2 38
20%
100%
80%
2 39
2 40
204
2 41
211
Seasonal Demand
Demand (units)
Average demand
for all periods
Seasonal demand
Time (quarters)
2 42
1
2 43
Avg. Fcst.
Season Impact
Quarter
Total
122
130
132
128
108
100
98
102
81
73
71
75
90
96
99
95
401
399
400
400
2 44
Quarter
128/100
1.28
102/100
1.02
75/100
0.75
95/100
0.95
Total
4.00
Seasonal Index
Assume 420
Deseasonalized demand
(average demand/period)
2 45
Annual forecast
No. of periods
420
4
= 105 units
2 46
Demand Management
Session 2
Tracking the
Forecast
2 47
2 48
Forecast OK
Bias
Random Variation
Month
Forecast
Actual
Variation
Forecast
Actual
Variation
100
90
-10
100
105
+5
100
125
+25
100
94
-6
100
120
+20
100
98
-2
100
125
+25
100
104
+4
100
120
+20
100
103
+3
100
110
+10
100
96
-4
Cumulative
Total
600
690
+90
600
600
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Total
Forecast
500
500
500
500
500
500
500
500
500
500
500
500
Actual
460
520
530
490
460
500
530
490
530
480
490
520
Absolute
deviation
40
20
30
10
40
30
10
30
20
10
20
260
2 50
MAD =
MAD =
|A - F|
Absolute errors
No. of periods
Average variation
260
= 22 units
12
2 51
1%
2 52
4%
15%
-3
-2
-1
-88
-44
-22
30%
30%
15%
MAD
22
44
88
Units
4%
1%
2 53
2 54
Demand Management
Session 2
Wrap-Up and
Homework
2 55
Learning Objectives
Upon completion of this session, participants will be
able to:
Demand Management Business Processes
Describe the significance of marketing management and
customer relationship management
Explain the role and objectives of demand planning
(forecasting and customer order management)
Characteristics of Demand
Differentiate independent from dependent demand
Identify at least five sources of independent demand
Recognize at least four demand patterns
2 56
Estimate Demand
Calculate and explain the logic of an exponential smoothing forecast
Explain the logic behind the calculation of a seasonal forecast
Calculate and explain the use of the mean absolute deviation
2 57
Vocabulary Check
Objective:
Reinforce terminology used in this session
Complete the activity in class, individually or in pairs, or as
homework
2 58
Vocabulary Check
1
O R D E R Q
U
A
I
L
N
I
D
T
M E A N A
Q
P
T
U
E
I
A
N
V
N
D
E
T R E N D
I
N
T
T
A
F O
T
I
I N T R
V
E X P O N E
5
13
15
16
17
2 59
U A L I F I E R S
M O V I N G A V
B S O L U T E D E V
10
11
D E P E N D E
X
T
D
R
S E A
I
M
N
A
R E C A S T
N
I
D
I N S I C
12
14
O
R
D
E
R
W
I
N
N
E
R
S
A N D O M
R A G E
7
B
A T I O N
A
T
S
O N A L
N T I A L S M O O T H I N G
Problem 2.4
2 60
Month
1
Demand
102
91
95
105
94
101
108
91
101
10
99
2 61
Month
Demand
102
91
95
96
105
97
94
98
101
100
108
101
91
100
101
100
10
99
97
2 62