Lecture-IV

Rizwan Tanveer Malik

Iqra University
Saturday 3 - 6
Visit to DP WORLD & MAERSK WAREHOUSE

• NIC Copies
• Availability
• Tentative Date 21st Oct. Saturday 9.Am
 Final Project
• Details
• Groups
• Industry
• Company
• Areas
 Demand Planning
“The process of planning all demands for
products and services to support the
marketplace. The process involves updating the
supporting plans and assumptions and reaching
consensus on an updated demand plan”

APICS Dictionary, 12th Edition

 Demand Planning
• Everything in supply network depends upon
the number of customers that go to the
retailer (website) offering your product.
 Components of Demand
• Trend- A general upward or downward movement of variable over time

• Seasonality- holidays, weather or other seasonal events- “ a repetitive

patterns of demand from year to year (or repeating time interval) with
some periods considerably higher than others.

• Random Variation- A fluctuation in data that is caused by uncertain or

random occurrences.

• Cycle. Over time, increases and decreases in economy influence demand.

 Demand Management
“ The function of recognizing all demands for
goods and services to support the marketplace.
In involves prioritizing demand when supply is
lacking and can facilitate the planning and use
of resources for profitable business results.”
 Aspects of Demand Planning
• Supply chain Dynamics
– Sources of demand variability
• Competition
• Seasonality
• Life cycle trends
• External factors- Business cycles etc.
• Promotions
• Disasters
• Distanced

– Bullwhip Effect

• WE HAVE DONE THESE CONCEPTS IN EARLIER SESSIONS

 Causes of Bullwhip
• Demand Forecast errors
– “The difference between actual demand and forecast demand, stated as an absolute
value or as a percentage”

• Lead Times
– In a logistics context, the time between recognition of the need for an order and the
receipts of goods. Individual components can include order preparation time, queue
time, processing time, move or transportation time, and receiving and inspection time.
– Replenishment Lead Time (Also known as Re-order Cycle) is the time that elapses from
the moment it is determined that product should be re-ordered until the product is back
on the shelf available.

• Order batching (Lumping)

– Batching or lumping small orders into bulk amounts to take economies of scale
– Instead of regular ordering, companies allow inventory to fall to a certain level
 Causes of Bullwhip
• Price Fluctuations and Promotions
• Rationing and shortage gaming
– Manufacturers sometime respond to anticipated
shortages in supply by only partially filling each
order- in other words, by rationing the product.
 How to mitigate bullwhip
• Information sharing
• Electronic Data Interchange (EDI)
• Vendor Managed Inventory
– “ A means of optimizing supply chain performance in which the supplier
has access to the customer’s inventory data and is responsible for
maintaining the inventory level required by the customer.”

• Reducing Lead times

• Reducing the size of batched orders
– Better forecasting
– Use of EDI
– More efficient transportation
• Trucks may carry multiple products
• Stable Prices
• Outsourcing
• Preventing shortage gaming
– Rely on history
– Share information
– Collaborate on more advance orders
– Penalize effects of gaming
• VIDEO- How to Reduce Bullwhip Effect
 Forecasting
• Forecasts are always wrong
• Forecasts should include an estimate of error
• Forecasts are more accurate for groups than
for single items.
• Forecasts of near term demand are more
accurate than long term forecasts.
Qualitative approach to forecasting demand

• Personal insight- Senior Person

• Sale force consensus estimate
• Market Research
• Delphi Method
– Anonymity
– Panel Director facilitates the process
– Multiple rounds
 Forecasting Techniques-Intrinsic
• Naïve
– Previous Months actual Demand
• Moving averages
– 3-Months MA = (M1+M2+M3) / 3
• Weighted Moving Averages
– 3-Month WMA = (1 x M1 + 2 x M2 + 3 X M3) / 6
• Exponential Smoothing
New Forecast = Last Period’s Forecast + α(last period’s demand – Last
Period’s Forecast)
 Forecasting- Extrinsic
• Housing starts,
• construction contract awards
• Automobile production
• Farm Income
• Steel production
• GNP etc.
 Postponement
• Delayed Product Differentiation
• Push-Pull Phenomenon
• IKEA
• DELL
• BBA / MBA
• Benetton's Knitted sweaters-Initially all white
• Fast Food chains, Tailor made goods
 Types of Collaboration
• QRP-Quick Response Program
– Retailer provided Point-of-Sale (POS) information
to the supplier
– Results in reduced lead times
• CR-Continuous Replenishment
– AKA rapid replenishment
– Shares POS data but shipments are prepared at
intervals determined in partnership with
customers.
• VMI- Vendor Managed Inventory
– P&G took over inventory management of diapers at Wal-
Mart to straighten out bullwhip effect in their supply chain.
– Determine how the inventory will be stored and displayed
– Provide the bins or other storage units
– Replenish the inventory on a schedule it determines based
upon customer supplied demand data
– Maintain inventory records
– Handle the delivery, receiving, stocking and counting
functions
CPFR MODEL
Role of Marketing in Demand Planning
• Market Research
– Finding Potential Markets
– Analyzing the markets-Who?Where?When?Why?How Many?
– Refining product design
• New Product Introductions
– Educating customers
– Educating supply chain partners
• Pricing
• Placement
• Packaging
• Branding
 3PL
• A third-party logistics provider (abbreviated 3PL, or
sometimes TPL) is a firm that provides a one stop shop service
to its customers of outsourced (or "third party") logistics
services for part, or all of their supply chain management
functions.

• 3PL typically specialize in integrated operation, warehousing

and transportation services that can be scaled and customized
to customer’s needs based on market conditions and the
demands and delivery service requirements for their products
and materials.
 3PL
• Third-party logistics providers are:
– freight forwarders
– courier companies
– other companies integrating & offering
subcontracted logistics and transportation services
 4PL
• Fourth-party logistics provider (abbreviated
4PL), lead logistics provider, or 4th Party
Logistics provider, is a consulting firm
specialized in logistics, transportation, and
supply chain management. Typical fourth-
party logistics providers are CPCS, SCMO, BMT,
Morpheus, Deloitte, Capgemini, and
Accenture
 4PL
• As the 4PL industry is still in its infancy and
currently being created throughout the world
(Blue Ocean Strategy), its definition and
function still leads to a lot of confusion, even
for professionals of the transportation
industry
 How 4PL Works
Company
3PL

3PL 4PL 3PL

3PL
Cross Docking
 Cross Docking
• Cross-docking is a practice in logistics of unloading
materials from an incoming semi-trailer truck or rail
car and loading these materials directly into
outbound trucks, trailers, or rail cars, with little or
no storage in between. This may be done to change
type of conveyance, to sort material intended for
different destinations, or to combine material from
different origins into transport vehicles (or
containers) with the same, or similar destination.
Cross Docking Video
 Design Collaboration
• Over the wall approach
• Information Sharing
• Formal Collaboration
• Supplier Designs
 Concurrent Engineering (CE)
• Product design improves when the
stakeholders other than engineers contribute
Design for Logistics
DFL
 Design for Reverse Logistics
• Easy Return, Repair and replenishment
• Provision of re-use or recycling
• Avoidance of hazardous materials or mitigated
danger
• Reduced energy consumption
• Use of light components & less material
 Varieties of Product Designs
• Component Commonality
– Single part is used to replace a variety of similar
parts
• Bolt size- assembly may be designed accordingly
• Modular Design
• That can be used in multiple products
• E.g. Computers-Ram-Hdisk-Graphics-Sound
• Universality
– “the strategy of designing a product initially
intended for one market in such a way that it can
be sold in other markets”
– One size fits all
– Blue jeans for e.g. can be specifically designed for
male & female markets but they can also be
designed universally so that one style suits both
markets.
 Mass Customization
• Moving final product configuration closer to
customer-
• AKA delayed differentiation
• Quiz#3- Lecture 3 & 4
• Details about Final Projects