An effective Demand Management system will gather marketing
information, generate forecast information, manage incoming customer
orders, and provide detailed information to the Production Planning
and Control System, primarily the Master Production Scheduler. The
detailed operations of this function differs markedly with the
Demand Response Strategy employed, as will be described below.
In Engineer-To-Order, the order information must be passed to the
Engineering functions as well as the Production Planning and
Control System, because the product has not yet been designed.
Design Engineering designs the product and documents the design,
including an engineering bill-of-materials. Design Engineering
passes the product design information to Manufacturing Engineering
who converts the Engineering bill-of-material to a Manufacturing
bill-of-materials and develops the product routing. Demand
Management is very much concerned with the control of customer
orders after they're entered into the system.. This is required
because a great deal of engineering must take place before the
order is built and sent to the customer, and there is much
uncertainty concerning the scope of these orders.
In Make-To-Order, order information need not be transmitted to the
Engineering functions since the products have already been designed.
The processing activities are keyed to individual customer orders.
The order cycle begins when the customer specifies the desired
product. On the basis of the customer's request, the producer will
quote a price and delivery time. If the customer accepts the
quotation, the producer assembles the product from components
and/or or builds completely to specifications, then ships the
product to the customer. The key operations performance measures for
the Make-to-Order response strategy are the delivery time and
percentage of orders delivered on time.
In Assemble-to-Order, the order inform ation need not be transmitted
to the Master Production Schedule, since the modules have already
been built based on the forecast and a Modular Planning Bill.
Instead, the order information is sent directly to the Final
Assembly Schedule for assembling and shipping the desired item. The
accuracy of the forecast and the accuracy of the usage percentages
for the modules are crucial to satisfying customer demand quickly by
assembling from existing components. Some companies will inflate
either the forecast or the usage percentages, or both, to ensure a
high service level.
In Make-to-Stock, very little in operations is keyed to actual
customer orders; rather, the focus is on replenishment of inventory
based upon forecasted usage. Thus an accurate forecast is the most
important output of demand
management. With the rare exception of back orders, it will not be
possible to identify actual customer orders in the production
process. To ensure products are available when ordered, we must
explicitly define service levels and resultant safety stocks. The
master scheduler is then responsible for maintaining the required
level of safety stocks. Engineering becomes involved in the
Make-to-Stock mode only for Engineering Change Orders (ECO). When an
ECO is introduced, product engineers and manufacturing engineers
design the new product and process, as described above for the
To be Continued
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