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Business Choices Business Choices Value to other divisions in the business and value to entire business Growth potential Order lead time and customer service level Financial terms and conditions Profit and/or value to the specific division of the business Strengthening the competitive position Customer Market What to include in value added
Value Measurement Value Measurement By unit or gross margin (economic profit margin) To gain market share where capacity permits By financial terms and conditions of payment For strategic growth in a specific geographical region For strategic growth in a specific market segment Impact on profitability from “value added” services For overall benefit to the business driving total economic value over time By net revenue As a pull through for the higher margin products
Demand Management Questions <ul><li>What should be produced? </li></ul><ul><li>Where should it be produced? </li></ul><ul><li>When should it be produced? </li></ul><ul><li>How much should be produced? </li></ul>
What is Demand Management? Demand Management Process of ensuring that market demand and the company’s capabilities are in synchronisation Prioritising demand when supply is lacking Recognising all demands for products and services to support the marketplace Planning and using resources for profitable business results Doing what is required to help make the demand happen To determine how the firm will satisfy that demand To recognise the sources of demand for a firm’s products To forecast demand
Factors Affecting Demand Factors.. Product Life Cycle Time of the year Customer plans & attitudes Product quality Reputation for service Status of the general economy Competitors’action Product design Advertisement & sales promotions
Demand Management Components Components Customer service level goal Sales and marketing plans Inventory targets Interplant shipments Distribution Resource Planning Demand forecasting at item and aggregate levels Product commitments New product introductions Customer order entry and promising
Demand Management Benefits Benefits Control over product availability Smoother product introductions A single game plan, based on the same set of numbers Confidence of sales force and the ability to deliver products / services Improved ability to respond to change
Demand Management Objectives Objectives Gather & analyse knowledge about customers, their problems & their unmet needs Share knowledge & develop products and services that solve customers’ problems Move functions to the channel member who can perform them most effectively and efficiently Develop and execute logistics, transportation and distribution methods to deliver products and services to coustomer in the desired format Identifying partners to perform the functions needed in the demand chain Share with other supply chain members knowledge about customers, available technology, and logistics challenges and opportunities To improve capabilities that enhance the firm’s ability to serve its customers.
Demand Management Challenges Challenges Lack of communication between departments results in little or no coordinated response to demand information Lack of process, to match demand and supply Primary emphasis should be on using demand information to create likely scenarios of the future as they relate to product supply alternatives Resulting business successes will be a outcome of the better match of demand to product availability Too much emphasis placed on demand forecasts with little attention paid to collaborative efforts, strategic and operational plans that need to be developed from the forecasts Demand information is often used more for tactical and operations purposes than for strategic purposes
Demand Management – Manf / Services <ul><li>Manufacturing </li></ul><ul><li>Promised delivery date (Make to Order, Assemble to Order </li></ul><ul><li>Inventory management (Make to Stock) </li></ul><ul><li>Assign Order Priority </li></ul><ul><li>Maintain Capacity </li></ul><ul><li>Services </li></ul><ul><li>Influence the demand pattern to match with the firm’s capacity </li></ul><ul><li>Waiting management program </li></ul><ul><li>Service-delay management </li></ul><ul><li>Maintain sufficient capacity to serve every customer immediately </li></ul><ul><li>Price to stimulate demand during slack periods/ lessen demand during busy periods </li></ul>Demand Management
Demand Management Process Distribution filling customer order Transport moving goods from the firm’s distribution centers to the customer’s distribution centers Marketing building brand awareness, introduce new products, allocation Field sales pricing, promotion, distribution and display of finished goods to retailers Manufacture scheduling, inventory control, capacity planning, work assignment and workloads Supply management procure materials, parts, component and finished goods Finance plant equipment investment, budgetary planning
Types of Demand <ul><li>Independent </li></ul><ul><li>Demand for any finished product </li></ul><ul><ul><li>Data used to forecast demand is collected from retailers’ POS data </li></ul></ul><ul><li>Dependent </li></ul><ul><li>Demand for the raw materials, parts, and components used to manufacture a product. </li></ul><ul><ul><li>Material requirements planning (MRP) </li></ul></ul>Derived Intermediaries forecast the number of lots needed to meet the needs of other intermediaries in the supply chain
Rough Cut Demand Management <ul><li>A diagnostic tool to </li></ul><ul><ul><li>get the most value from current production and asset capability </li></ul></ul><ul><ul><li>provide a “sanity check” for determination of real value growth prior to expanding capacity </li></ul></ul><ul><ul><li>differentiate the top 25% of the business from the bottom 25% based on value and current offering </li></ul></ul><ul><li>Use the S&OP process to address the lowest 20% and improve the relationship </li></ul>
Customer Service Challenges Customer Service What do your customers feel about present service levels? How does your service compare with your competitors? Do customer perceptions match up with yours? Can improved customer service be used as a strategic weapon to provide a competitive advantage? Do you segment your customers according to the varying degrees of services they require? Is there a way to provide the same levels of services in a cost effective manner? What measurements do you use to monitor service performance? In the minds of your customer, how important is service when compared to other elements of the marketing mix
Customer Service Performance Measures <ul><li>Orders received on time </li></ul><ul><li>Orders received complete </li></ul><ul><li>Orders received damage free </li></ul><ul><li>Orders filled accurately </li></ul><ul><li>Orders billed accurately </li></ul>
<ul><li>“ Opportunity may knock only once, but temptation leans on the doorbell.” </li></ul><ul><ul><li>- Anonymous </li></ul></ul>