Quick Response Logistics
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Demand Driven Manufacturing
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Bill Gaw's Top 12
Lean Manufacturing

Demand Management

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 Engineer-to-Order mode.

To be Continued


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