TU-E2020 ADVANCED OPERATIONS MANAGEMENT Advanced Demand Planning and Capacity Management 9 Nov, 2015 Doctoral candidate, researcher Jari Laine Department of Industrial Engineering and Management
Examples of typical industrial Planning horizons Strategic 1-3 years Tactical 3-18months Operational 0-12 weeks 2
Typical tasks in Demand Planning (repetitive/process mfg) Source: M Wagner - Supply chain management and advanced planning, 2000 - Springer 3
Different Reasons to Plan Demand and Supply Optimize the use of resources- >cost Labor Production equipment Inventories Transportation Capital employed in the supply chain Optimize Supply Performance-> customer service Demand pull based Production and materials scheduling Speed of delivery Accuracy of delivery Flexibility to changes Optimize revenue and market share Speed to react to demand changes New product introduction Entering new markets 4
Order Penetration Point OPP, Demand Visibility Point DVP ORDER PENETRATION POINT (OPP) point at which a product is assigned to specific, known customer order ship-to-order pack-to-order assembly-to-order make-to-order buy-to-order EXECUTION CYCLE DEMAND (order, replenishment, ) TRADE CUSTOMER END CUSTOMER PRODUCER SUPPLY (bundle of goods and services) Source and (c): Prof. Eero Eloranta, Aalto university DEMAND VISIBILITY POINT (DVP) demand point perceived by the producer customer's arm's length order customer's inventory replenishment customer's production / supply plan customer's production schedule customer's customer's order customer s assortment planning etc. to end customer 5
Where is your DVP? Where should it be? Where is your OPP? Order confirmation with delivery date Where should it be? Maketoorder Maketostock Order receipt & acknowledgement order checks Customer Production Picking, packing, dispatching Transportation, possible warehousing & consolidation Delivery, possible installation Invoicing Material flow Information flow 6
OPP and Operational Choices OPP, order penetration point implies how deep into production the customer is visible. It shows where the customer order is attached into material flow. Engineering Purchasing Manufacturing Assembly FGI Make to stock (Ship to order) Assemble to order (ATO) / Build to order (BTO) Make to order (MTO) Engineer to order (ETO) / Purchase (buy) to order Variants: Pack-to-order, Configure-to-Order, Build-to-Forecast... Picture Source: Marja Blomqvist 7
Use of OPP in strategic inventory planning 8
How about OPP, VOP and Operational mode in these businesses? 9
On Demand Planning 10
Demand Type and Time Perspective Picturen Source: www.cadcom 11
Daily Demand and (Dynamic) Pricing Picture Source: www.eia.gov 12
Demand vs. Service Level, Daily Variation Picture source: www.yankee-associates.com 13
Learn to Identify Type of variation Distribution function (normal, exponential ) Causality Random/Stochastic/Noise Trend (flat, rising, declining) Distribution of Demand in Time Buckets (Years, Months, Weeks, Days, Hours, Minutes ) 14
Special notes! Often the demand profile is different in different product categories/markets etc. Typically the demand is a combination some of the basic mode Bullwhip is always there Product Life cycle effects: product launch, growth, maturity, decline, phase out need different planning strategies 15
Typical questions What to plan? What is the needed granularity? What are the relevant planning cycles and horizons? What information to use? What it-solutions to use? Who is planning? Who are participating? How to agree and communicate the results? How to implement the plan How to measure the process? 16
Establishing Demand Plan Demand Plan Inputs (Sheldon, 2006) 17
Principle of Demand Aggregation Picture Source: Lapide 2006 18
Aggregation methods Top Down Bottom Up Mixed 19
Segmented approach, an example Top 10 % of products 10-40% of products Bottom 50% of products Top 10 % of customers Superior service level, CPFR & VMI 10-50% of customers Bottom 50 % of customers Cost Optimized supply chain, Bottom up planning process. Served by distributors Kill / Statistical forecast Picture source: Jussi Laaksonen 2013 20
On Capacity Management 21
Tactical Choises in S&OP process Source: J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 22
Leading Demand Capacity Change Source: J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 23
Lagging Demand Capacity Change Source: J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 24
Capacity Tracking Demand Source: J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 25
Level Capacity Strategy 26
Mix Capacity Strategy Source: J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 27
Typical Strategies for Different Product/Process Environments Source: J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 28
Thank you 9/24/2015 29