OMSAN LOJİSTİK

Demand Management:Processes & Activities

Logistics System Planning

/M/ apping

/A/ ssessment

/B/ alancing

/O/ ptimization

/R/ econfiguration

/B/alancing of Logistics Systems

Trade-off management among logistics agents and processes

System Balancing: Two Types of Activities

• Execution• (ALL logistics systems perform these activities

intuitively or in a planned manner)

• Planning• (Deliberate activities within the logistics system with the goal

to change the system’s conditions and achieve a specific result!)

Demand Management

Fulfillment Management

Sourcing Management

Logistics Planning System

Use the Past to Understand the Future

L og is tic s P lan n in g S ys tem

G en era te D atan , n + 1 , n + 2 ,

E xecu te S tra teg y

V a lid a teP erfo rm an ce M easu res

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M od e l

MODELING

Interacting VariablesDirection of Interaction

What has changed…

• Today ….

• Real Data to Prove us right or wrong

• Mistakes are more expensive and riskier

• Execution strategies are so complex you can’t afford mistakes

• Computation power unknown to logistics management

Surprise or Control

• Inductive Thinking• Plan the steps to

achieve a desired result

• Sequential • Uncertain results • Surprise• Linearity

• Deductive Thinking• Determine the

desired result• Go backwards to

understand the causes of the desired result

• Non-sequential• Control• Circularity

Demand Management

Factors Driving Logistics Change

• Shortening of product life cycles

• New product proliferation

• Power shift in the distribution channels

• Customer service as a competitive force

• Technology

• Global competition

• Cost reduction and profitability focus

Customer Service Decisions

• What Level of Service Should We Provide?– Levels constraint: A firm’s logistics system– Combine with logistics activities to provide

time and place utility; the end-result of business logistics

– Augmented product feature that adds value to the buyer

Customer Service Definition

• Three views– As an activity– As performance measurement– As a corporate philosophy

• Customer service – brand loyalty market share relationships

Measurements

• Time: Order Cycle Time (seller) Lead Times (Buyer)

• Dependability

• Communications

• Convenience

Trends in Customer Service

• The customer defines the standards

• Vendor can influence the customer

• Multidimensional

• Dynamics

• Information focus rather than inventory

• Measurable aspect

Features of a Customer Service Policy

• Unique

• Segmented

• Formal

• Proactive

• Extrapolated

Who’s the “A” Customer For…?

• … Sales & marketing?

• … Finance?

• … Purchasing?

• … Distribution center?

• … Transportation?

• … Inventory planning?

Customer Order Management

• What?• Who?• When?• How?• How Much?• Where?• …

Customer Service Policy Template

CRM = Customer Relationship Management. More than a fad

Specialized teams

Proactive service policyInformation dispersion

Performance-based rewards to sales teams

Intelligent Forecasting

Top-Down and Bottom-Up Event Calendars Incorporating Macro-economic and Industry

Indicators Individual Accountability for Forecast Accuracy Seasonality Smoothing Best-Fit Modeling Capture and Measure True Demand Measuring Forecast Accuracy by SKU and

Channel

Forecasting Discouragement

• Repeated forecasting in the supply chain amplifies errors.

• The longer the replenishment lead time the bigger the forecast error.

• Price fluctuations and promotional events cause huge, unpredictable spikes in demand.

• Shortage Gaming: Customers order more than they really need and cancel orders when the shortage is over.

• Unfilled demand is not measured.

Forecasting Principles

• Measure and monitor forecasting accuracy.

• Establish individual accountability for forecasting accuracy.

• Measure true demand:– unsatisfied demand– overstated demand due to shortage

gaming

Forecasting Principles

• Implement information sharing to let everyone know true demand.

• Establish and implement an event calendar to improve accuracy.

• Design organization and control policy to insure quick reaction to forecast errors.

Forecasting Principles

• Use bottom-up forecasting to predict category and overall business forecasts for country, region, and global sales.

• Use top-down forecasting to predict region and country sales for categories and SKUs.

• Incorporate leading/lagging economic and industry indicators in top-down forecasting.

Forecasting Principles

• Rationalize top-down and bottom-up forecasts with human intelligence.

• Stratify SKUs on the basis of demand and demand variability to determine:– forecastability– forecasting model

• Use best-fit model to predict future demand incorporating overall and seasonal trends.

Forecasting Principles

• Reduce replenishment lead times to reduce the overall forecast error.

• The enemy is forecast error and reaction to it - let’s do everything within our control to reduce the forecast error.

• The barriers to forecast accuracy include bias, ignorance, poor data, and denial.

Typical Demand Patterns

Selection of Statistical Tools to Match Demand Behavior

Revenue Management

What’s all about it?

• Solving the dichotomy of inventory and pricing

• Inventory decisions are made at the individual, unitary level

• Pricing decisions are made at the segment, global, multi-purchase level

Revenue Management System

• Capacity management– Fleet utilization

• Pricing– Corporate revenue (consumer’s sensitivity to

price)

• Reservations control– Revenue maximization

Demand Management Principles

• Logistics strategy and customer service aligned with global logistics conditions

• Segmented Logistics Service Policy by Location & Conditions (Expectations)

• Consistent Use of INCOTERMS and Standard International Contracts

• Multilingual/Multicurrency/Multi-time Zone Order Entry Systems & Order Status Communication

Global Customer Service World-Class Principles

• Electronic Commerce / EDIFACT/EFT/ Internet/International Faxing

• Back order, partial orders, pricing and returns policy and procedures segmented by country/customer/SKU

• CS aligned with other GL processes (inventory management, procurement, manufacturing, transportation and warehousing)

• Pricing aligned with Service Policy

3. Global Customer Service World-Class Principles

• Consolidation of all global logistics functions under one umbrella

• Accurate sales forecasting• Vendor partnerships• Proper documentation• Flexibility to deal with special market situations• High knowledge about international finance

options and work with an expert bank in GL