Demand Management 




The initial review of performance to plan gets everyone current on the progress made over the preceding week or month. The participants now have the latest demand forecast and any new information about production capacity or management strategies.

The next and main purpose of the meeting is to evaluate potential changes to the plan and agree to hold or change course. The output is an updated production (and sales) plan. Manufacturing uses it to build what we plan to sell. Sales uses it to sell what we plan to build.

In some cases, Sales or Manufacturing management may have prepared proposals to change the plan. Again, these proposals are usually set out in a prearranged format, often on hard copy or in spreadsheets. Proponents present the merits of their suggested changes. Other participants may question those merits or the feasibility of the changes. Or, they may suggest any number of modifications to the proposed alternatives.

If capacity and materials are unlimited and production and inven­tory costs are no object, then the discussion can proceed simply on the basis of which alternative is most likely to satisfy actual demand as it materializes. However, if our manufacturing com­pany wants to remain in business and thus is trying to be competitive and use expensive, limited resources wisely, there is a dilemma. Even at the aggregate product level of detail, there are many possible production plans.

For example, what if Sales believes the upward demand trend will continue for Product Group X and for Group Z as well. "We were caught with our pants down last month. Let's increase the forecast by 10% for these groups and match it with a corresponding production plan increase."

Manufacturing responds, based on long experience and intuition, that a 10% production increase for Product Groups X and Z can't be managed without pushing other production out in time. "Which production is Sales willing to sacrifice? Perhaps we should continue on course for a week, limit disruption in the factory, prepare to boost production if needed and subcontract to make up the shortfall if we're wrong."

What is the answer? Clearly, there is no single obvious answer. First, we might want to know what size production increase for Product Groups X and Z could be handled without impact on other schedules, 5%, 7%? If a 10% increase does in fact mean adjusting other schedules, which production could be delayed? How much delay would be required? What is the extra cost of subcontracting

if we are forced to use it and do we have the key purchased materials to support it anyway? What is the aggregate inventory impact of each scenario?

In reality, many such SOP decisions are consigned to gut feel, to the strongest and loudest personality in the room or to a grossly oversimplified thumbnail planning model. It's not because the alternatives can't be evaluated or analyzed properly at this level. Again, it's because we haven't brought the right data and software into the meeting where the real decision-making occurs.

For this task, we need much the same data used in reviewing performance to plan. We need similar software as well, again running on notebook PCs. In addition to flexible Supply-Demand analysis, we need basic MPS and Finite Capacity Planning capabilities. MPS and FCP are needed not for generating detailed production schedules, but to help participants quickly make aggregate level tradeoffs while staying within basic key resource and material constraints. Traditional Rough-Cut reports can then be used as document starting and ending points for key resource requirements.

In this case, by bringing the right data and tools into the SOP meeting, we get better planning decisions and results that are far more likely to prove executable in the real world outside the meeting room.

To be Continued


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