supply chain management , demand management

1. Chapter 7 Demand Management
Learning Objectives
 After reading this chapter, you should be able to do the following:
 Understand the critical importance of outbound-to-customer logistics
systems.
 Appreciate the growing need for effective demand management as
part of an organization’s overall logistics and supply chain expertise.

2. Learning Objectives (cont.)
 Know the types of forecasts that might be needed, and
understand how collaboration among trading partners will
help the overall forecasting and demand management
processes.
 Understand the basic principles underlying the sales and
operations planning process.
 Identify the key steps in the order fulfillment process and
appreciate the various channel structures that might be used
in the fulfillment process.

3. Many organizations place significant emphasis on outbound-to-
customer logistics systems
 Chapter focus:
 demand management
 forecasting
 Sales and Operations Planning (S&OP) process
 collaborative forecasting approaches
 fulfillment process and the processes and methods

4. Demand Management
 The ability of firms throughout the supply chain to collaborate on
activities related to the flow of product, services, information, and
capital.
 Problems in achieving goal:
 Lack of coordination between departments
 Too much emphasis on forecasts of demand, with less attention on
the collaborative efforts and the strategic and operational plans
 Demand information is used more for tactical and operational than
for strategic purposes

8. Direct-to-Customer (DTC) Fulfillment
 Advantages:
 low start-up costs
 workforce efficiency because of consolidated operations
 Disadvantages:
 the order profile will change (store orders in case and/or pallet
quantities, consumer orders, “eaches” in smaller order quantities)
 products might not be available in consumer units (eaches)
 “fast pick,” or broken case, operation to be added to the distribution
center
 conflict between a store order and an Internet order

10. Integrated Fulfillment
 Retailer maintains both a “bricks-and-mortar” and “clicks-and-
mortar” presence
 operates one distribution network to service both channels
 Advantage
 low start-up costs
 existing network can service both
 Disadvantages
 order profile will change with addition of Internet orders
 case lots versus “eaches”
 would require a “fast pick,” or broken case operation
 conflict might arise between a store order and an Internet order

12.  Dedicated Fulfillment
 Both a store and an Internet presence with two separate
distribution networks
 Advantage:
 separate distribution network for store delivery and consumer
delivery eliminates most of the disadvantages of integrated
fulfillment
 Disadvantage:
 duplicate facilities and duplicate inventories

14.  Outsourced Fulfillment
 assumes that another firm will perform the fulfillment
 Advantages:
 low start-up costs for the retailer to service the Internet channel
 possible transportation economies
 Disadvantage:
 loss of control over service levels

16. Drop-Shipped Fulfillment
 also called direct store delivery, vendor delivers
directly to retailer, bypassing retailer’s distribution
network.
 works best for products that have a short shelf life
 Advantages:
 reduction of inventory in the distribution network
 vendor has direct control of its inventories
 Disadvantage:
 possible reduction of inventory visibility

18. Store Fulfillment
The order is placed through the Internet site and sent to the nearest
store for customer pick up
 Advantages:
 short lead time to the customer
 low start-up costs for the retailer
 returns can be handled through the store
 product availability in consumer units
 Disadvantages:
 reduced control and consistency over order fill
 conflict may arise between inventories
 must have real-time visibility to in-store inventories
 stores lack sufficient space to store product

20. Flow-Through Fulfillment
Product is picked and packed at distribution center, then
sent to the store for pickup
 Advantages:
 eliminates the inventory conflict
 avoids the cost of the “last mile”
 returns can be handled through the existing store network
 Disadvantage:
 Storage space at the store for pickup items a problem

21. Summary
 Outbound-to-customer logistics systems have received the most attention in
many companies, but even in today’s customer service environment, outbound
and inbound logistics systems must be coordinated.
 Demand management may be thought of as “focused efforts to estimate and
manage customers’ demand, with the intention of using this information to shape
operating decisions.”
 Although many forecasts are made throughout the supply chain, the forecast of
primary demand from the end user or consumer will be the most important. It is
essential that this demand information be shared with trading partners
throughout the supply chain and be the basis for collaborative decision making.
 Various approaches to forecasting are available, each serving different purposes.

22. Summary
 Various approaches to forecasting are available, each serving different purposes.
 The S&OP process has gained much attention in industry today. It serves the
purpose of allowing a firm to operate from a single forecast.
 The S&OP process is a continual loop involving participation from sales,
operations, and finance to arrive at an internal consensus forecast.
 CPFR is a method to allow trading partners in the supply chain to collaboratively
develop and agree upon a forecast of sales. This allows for the elimination of
inventories held because of uncertainty in the supply chain.
 A number of distribution channel alternatives might be considered by
organizations today. Effective management of the various choices requires
coordination and integration of marketing, logistics, and finance within the firm,
as well as coordination of overall channel-wide activities across the organizations
in the channel.