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Planning Demand and Supply in a Supply Chain

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Include expected value and measure of error. ... Boat traffic intensity in the upper Mississippi until year 2100; Army Corps of Engineers ... – PowerPoint PPT presentation

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Title: Planning Demand and Supply in a Supply Chain


1
Planning Demand and Supply in a Supply Chain
  • Forecasting

2
Learning Objectives
  • Overview of forecasting
  • Forecast errors
  • Aggregate planning in the supply chain
  • Managing demand
  • Managing capacity

3
Phases of Supply Chain Decisions
  • Strategy or design Forecast
  • Planning Forecast
  • Operation/Execution Actual demand
  • Since actual demands differ from the forecasts,
  • so does the execution from the plans.
  • E.g. Supply Chain degree plans for 40 students
    per year whereas the actual is ??

4
Characteristics of forecasts
  • Forecasts are always wrong. Include expected
    value and measure of error.
  • Long-term forecasts are less accurate than
    short-term forecasts.
  • Too long term forecasts are useless Forecast
    horizon
  • Forecasting to determine
  • Raw material purchases for the next week
    Ericsson
  • Annual electricity generation capacity in TX for
    the next 30 years Texas Utilities
  • Boat traffic intensity in the upper Mississippi
    until year 2100 Army Corps of Engineers
  • Aggregate forecasts are more accurate than
    disaggregate forecasts
  • Variance of aggregate is smaller because extremes
    cancel out
  • Two samples 3,5 and 2,6.
  • Averages 4 and 4.
  • Totals 8 and 8.
  • Variance of sample averages/totals0
  • Variance of 3,5,2,65/2
  • Several ways to aggregate
  • Products into product groups Telecom switch
    boxes
  • Demand by location Texas region
  • Demand by time April demand

5
Forecasting Methods
  • Qualitative
  • Expert opinion
  • E.g. Why do you listen to Wall Street stock
    analysts?
  • What if we all listen to the same analyst? S/He
    becomes right!
  • Time Series
  • Static
  • Adaptive
  • Causal Linear regression
  • Forecast Simulation for planning purposes

6
Components of an observation
  • Observed demand (O)
  • Systematic component (S) Random component (R)
  • A touch of philosophy
  • Is the world random or everything is
    pre-determined?
  • Pragmatic answer
  • Everything we cannot afford to study in detail
    is random!

Level (current deseasonalized demand)
Trend (growth or decline in demand)
Seasonality (predictable seasonal fluctuation)
7
Time Series Forecasting
Forecast demand for the next four quarters.
8
Time Series Forecasting
9
Master Production Schedule (MPS)
  • MPS is a schedule of future deliveries. A
    combination of forecasts and firm orders.

10
Summary
  • Aggregate forecasts are more accurate
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