Accurate Response Technique that allows companies to match
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Accurate Response Technique that allows companies to match supply and supply in a uncertain environment
Planning Environment l Speculative – – l Predictable demand Low-risk products Reactive – – Unpredictable demand High-risk products
Accurate Response Approach l l Get as much as early market signals as you possibly can Slash order processing time through computerized ordering/processing system Reduce manufacturing lead time by pre-positioning raw material and components Utilize air freight, especially in the unpredictable demand during the reactive period
Measure of Risk l l Mean of forecast Standard Deviation of forecast Range of forecast Forecasting error
Why Inaccuracies in Forecast l Increasing product variety – l Shorter product life cycle – l Leads to higher forecast errors Less demand history to base forecast Longer supply chains – Could imply production commitments have to be made earlier
Difficulty in matching supply with demand l l No problem if we had perfect forecasts or perfect response, i. e we could make everything to order Scenarios at most companies: – – l “Reactive Capacity” decreases with time Forecast improves with time Options: Forecast better, plan better, or “react to demand signals better. time
Ingredients of Accurate Response l l Flexible manufacturing systems Reduced cycle time Be more resourceful in using demand indicators to improve forecast Institute a system of tracking forecast errors
Ways to increase reactive capacity l Reduce lead time – – – l Transportation: use of air freight Factory throughput: cellular/flexible manufacturing Material: hold raw material inventory Obtain market information earlier – – Use information technology Identify demand indicators (i. e early write at Sports Obermeyer)
