G
LO
BA
LL
IS
G
O
ND
A
S
TIC
SUPPLY CH
AIN
MA
NA
Assignment 3
GE
M
Group presentation
PRESENTED BY:
Dao Hong Thinh - 104057864
Mai Ngoc Huyen Vy - 104050737
Tran Nhat Anh - 103845864
Tran Thi Thao Linh - 103542783
Tran Thi Ngoc Ha - 103809064
EN
T
Topic Outline
1
Demand Management
2
3
4
Collaborative Planning,
Forecasting & Replenishment
5
Balancing Supply & Demand
Sales & Operations Planning
6
Demand Forecasting
Case study 7.1
1. Demand Management
The Essence of Demand Management
Predict and manage client demand to influence
operations decisions (Rajani et al., 2022).
Enable enterprises throughout the supply chain particularly those engaged in manufacturing
through the customer - to collaborate on the
product, service, information, and capital flows
(Hayes, 2022).
Desired End
Result
Greater value for
the end user or
consumer (Priem &
Swink, 2012).
Importance of Demand Management
WHY Demand Management?
It is the process that BALANCES customer's requirements
within the capability of supply chain. (Notteboom et al.,
2013)
Uneffective operational flexibility in Demand Management
Disconnected among departments in firm.
Only focus on Demand Forecast - less attention on
collaboration/strategy/plan
Only focus on Information of Demand for operation - less
focus on strategy
Demand Management can't
support the business strategy
effectively and efficiently
So...
to gain most benefit and create greater
value for consumer...
should balance and pay attention equally on each
element of the demand management process.
Know consumers, their issues - their needs
Finding demand chain partners
Choose the best channel member who can handle
and take part in the functions
Sharing knowledge about
customers/technology/logistics
challenges/opportunities with other supply chain
members
Development of products and services
Develop finest methods/ strategies/ plans to
deliver goods and services to customers
2. Balancing Supply & Demand
Problem of Supply-Demand Misalignment
Imbalance between Supply and Demand:
The appearance of out of stocks
The appearance of high inventory/ inventory cost
Loss potential customers
Lose future revenue from buyers
Supply-Demand Balancing Methods
Appropriate methods can be used in order to
manage safety stocks, minimize inventory cost
NO WASTE - JUST IN TIME
DEMAND
SUPPLY
External:
Price
Time
Internal:
Inventory
Production
3. Sales & Operations Planning
1. Arriving at Internal Consensus Forecast
An organization needs an internal forecast that all functional
groups can execute. Sales and operations planning (S&OP)
can produce this consensus projection.
2. Five-Step Process
Preliminary
demand forecast
Marketing
forecast
S&OP
Financial
forecast
Internal Consensus
Forecast
Distribution
forecast
Manufacturing
forecast
John Joseph Coyle et al. (2017)
4. Collaborative Planning, Forecasting, &
Replenishment
Arriving at Inter-Organizational Consensus Forecast
"Collaborative planning, forecasting, and
replenishment (CPFR) programs concern
Collaboration where two or more parties in the
supply chain jointly plan a number of promotional
activities and work out synchronized forecasts, on
the basis of which the production and replenishment
processes are determined" Skjoett‐Larsen et al.
(2003)
Internet-based collaboration on operational
planning and execution.
A consensus forecast must be reached among
supply chain members.
John Joseph Coyle et al. (2017)
John Joseph Coyle et al. (2017)
Collaborative Planning, Forecasting, & Replenishment
Benefits of CPFR
Continually monitor demand signals, allowing businesses to timely respond to changes in
customer demand.
Decrease stockouts and shorten order cycles, and prevent the appearance of the "Bullwhip
Effect". Increase the number of products that can be supplied, and the high rate of delivery of
the right product to the right place and at the right time.
Different views on the market and information, as well as different consumer data,
experiences, and research data.
Build stronger relationships between trading partners by sharing information and working
together, leading to more effective collaboration and greater trust.
Improve customer satisfaction.
5. Demand Forecasting
Forecasts help marketing and operations set goals and plan implementation.
Two types of demand exist:
Independent demand
Dependent demand
Factors Affecting Demand
RANDOM VARIATION
An unanticipated event that necessitates stockpiling.
TREND FLUCTUATION
An organization's progressive demand rise or falls.
SEASONAL FLUCTUATION
Most organizations repeat in 1 year.
Forecast Errors
Forecasting Techniques
1. The cumulative sum of forecast errors (CFE)
1. Simple Moving Average
2. Mean squared error (MSE)
3. Mean absolute deviation (MAD)
4. Mean absolute percent error (MAPE)
Tracking signal is good at detecting "bias" in forecast mistakes:
Pros: swift and simple to use.
Cons: previous demand declined rapidly;
not seasonal, trend, or business cycle
influenced.
2. Weighted Moving Average
Pros: This emphasizes recent
demand as a forecaster.
Cons: Unsuitable for seasonal
demand.
3. Exponential Smoothing
Pros: simplicity and minimal data
requirements, suitable for steady demand.
Cons: forecasts lag demand; not suitable
for seasonal demand or trends.
6. Case Study 7.1
Tires for You, Inc.
Tires for You, Inc. (TFY), founded in 1987, is an automotive repair
shop specializing in replacement tires. Located in Altoona,
Pennsylvania, TFY has grown successfully over the past few years
because of the addition of a new general manager, Ian Overbaugh.
Since tire replacement is a major portion of TFY's business (it also
performs oil changes, small mechanical repairs, etc.), Ian was
surprised at the lack of forecasts for tire consumption for the
company. His senior mechanic, Skip Grenoble, told him that they
usually stocked for this year what they sold last year. He readily
admitted that several times throughout the season stockouts
occurred and customers had to go elsewhere for tires.
Although many tire replacements were for defective or destroyed
tires, most tires were installed on cars whose original tires had
worn out. Most often, four tires were installed at the same time.
Ian was determined to get a better idea of how many tires to hold
in stock during the various months of the year. Listed below is a
summary of individual tire sales by month:
1. CALCULATE A FORECAST USING A SIMPLE THREE-MONTH MOVING AVERAGE.
The formula for calculating a three-month moving average is:
2. CALCULATE A FORECAST USING A THREE-PERIOD WEIGHTED MOVING AVERAGE. USE WEIGHTS OF 0.60, 0.30, AND 0.10 FOR THE
MOST RECENT PERIOD, THE SECOND MOST RECENT PERIOD, AND THE THIRD MOST RECENT PERIOD, RESPECTIVELY.
The formula for calculating a three-period weight moving average is:
3. CALCULATE A FORECAST USING THE EXPONENTIAL SMOOTHING METHOD. ASSUME THE FORECAST FOR PERIOD 1 IS
9,500. USE ALPHA = 0.40.
At
Ft
The formula for calculating the exponential smoothing method is:
4. ONCE YOU HAVE CALCULATED THE FORECASTS BASED ON THE ABOVE DATA, DETERMINE THE ERROR TERMS BY
COMPARING THEM TO THE ACTUAL SALES FOR 2012 GIVEN BELOW:
4. ONCE YOU HAVE CALCULATED THE FORECASTS BASED ON THE ABOVE DATA, DETERMINE THE ERROR TERMS BY COMPARING THEM TO
THE ACTUAL SALES FOR 2012 GIVEN BELOW:
Fi
Ai
4. ONCE YOU HAVE CALCULATED THE FORECASTS BASED ON THE ABOVE DATA, DETERMINE THE ERROR TERMS BY COMPARING
THEM TO THE ACTUAL SALES FOR 2012 GIVEN BELOW:
4. ONCE YOU HAVE CALCULATED THE FORECASTS BASED ON THE ABOVE DATA, DETERMINE THE ERROR TERMS BY COMPARING
THEM TO THE ACTUAL SALES FOR 2012 GIVEN BELOW:
5. Based on the three methods used to calculate a forecast for TFY, which method produced the
best forecast? Why? What measures of forecast error did you use? How could you improve upon
this forecast?
For MSE, there is no exact value.
The lower the value the better, and 0 means the model is perfect. The MSE's main benefit is choosing
one prediction model over another because there is no right answer. Therefore, it can clearly see the
number of MSE in the three tables analyzed in answer 4 above, the exponential smoothing method of
forecasting is best for the given set of data.
Conclusion
In today's customer service environment, outbound and inbound logistics
systems must be synchronized.
Demand management involves “focused efforts to estimate and manage
customers' demand, with the purpose of leveraging this knowledge to drive
operating decisions.”
The most essential supply chain forecast is end-user demand. This demand
data must be shared with supply chain partners for collaborative decisionmaking.
Forecasting methods serve diverse goals. Industry attention is focused on
S&OP. It lets a company use one forecast.
Sales, operations, and finance collaborate in the S&OP cycle to create an
internal consensus projection.
CPFR lets supply chain trading partners collaborate on sales forecasts. This
eliminates inventories.
REFERENCES
John J. Coyle, C. John Langley, Jr., Robert A. Novack and Brian J. Gibson. (2016). DEMAND MANAGEMENT.
Theodore Knight, Supply Chain Management: A logistics perspective, (pp. 207- pp. 227). Publisher:
United States of America
http://xuatnhapkhautancang.com/upload/news/john-j-coyle-jr-langley-c-john-robert-a-novackbrian-j-gibson-supply-chain-management-a-logistics-perspectivesouthwestern-pub-20161996.pdf
Laporte-Roy, C. (2019, January 2). Collaborative Planning, forecasting & replenishment (CPFR).
Demand Planning. Retrieved February 6, 2023, from https://demandplanning.com/2018/12/12/collaborative-planning-forecasting-replenishment-cpfr/
Moving average formula: Calculator (examples with Excel template). EDUCBA. (2021, March 23).
Retrieved February 6, 2023, from https://www.educba.com/moving-average-formula/
5, J., & Rowe, W. (2018, July 5). Mean square error & R2 score clearly explained. BMC Blogs. Retrieved
February 7, 2023, from https://www.bmc.com/blogs/mean-squared-error-r2-and-variance-inregression-analysis/
8th & Walton | on February 23. (2022, June 23). What is CPFR in supply chain? meaning, features, &
process. 8th & Walton. Retrieved February 6, 2023, from https://www.8thandwalton.com/blog/cpfr/
Thank you for listening!