Accurate Response
Technique that allows companies to match
supply and supply in a uncertain
environment
Planning Environment

Speculative
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Predictable demand
Low-risk products
Reactive
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–
Unpredictable demand
High-risk products
Accurate Response Approach
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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


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Mean of forecast
Standard Deviation of forecast
Range of forecast
Forecasting error
Why Inaccuracies in Forecast

Increasing product variety
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
Shorter product life cycle
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
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

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No problem if we had perfect forecasts or
perfect response, i. e we could make
everything to order
Scenarios at most companies:
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
“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
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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

Reduce lead time
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Transportation: use of air freight
Factory throughput: cellular/flexible manufacturing
Material: hold raw material inventory
Obtain market information earlier
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Use information technology
Identify demand indicators (i. e early write at
Sports Obermeyer)