LEAD TIME GAP
CUSTOMER ORDER CYCLE
- refers to the length of time that
the customer is pre- pared to
wait, from when the order is
placed through to when the goods
are received.
- Maximum period available for
order fulfillment
COMPETITIVE CONDITIONS/ NATURE
OF PRODUCT
- will influence the customer’s
willingness to wait.
FORECAST
- The way most companies address
this problem is by seeking to
forecast the market’s
requirements and then to build
inventory ahead of demand.
- Accuracy is always less than
perfect. It has been suggested
that all mistakes in forecasting end
up as an inventory problem –
whether too much or too little
- Thus a customer may be willing
to wait a few weeks for the
delivery of a car with particular
options but only a day for a new
set of tires.
CONVENTIONAL ORGANIZATION
- the only way to bridge the gap
between the logistics lead time and
the customer’s order cycle is by
carrying inventory.
POSSIBLE TRUE OR FALSE:
- Unfortunately all our experience
suggests that no matter how
sophisticated the forecast, its
accuracy is always less than
perfect.
REDUCING THE GAP
- Reducing the gap can be achieved
by shortening the logistics lead
time
VISIBILITY OF DEMAND
- By ‘real’ demand we mean the
demand in the final marketplace,
not the ‘derived’ demand that is
filtered upstream through any
intermediary organizations
WARNING
- The challenge is to find a way to
receive earlier warning of the
customers’ requirements.
DEMAND PENETRATION POINT
- point is too far down the pipeline
and, secondly, real demand is
hidden from view and all we tend
to see are orders.
- is that it occurs at that point in the
logistics chain where real demand
meets the plan.
DECOUPLING POINT
- and is ideally the point in the
supply chain where strategic
inventory is held.
IMPORTANCE OF DE-COUPLING
POINT
• generic inventory at the point
• facilitate the late configuration:
manufacture of the product against
a customer’s specific requirements
INFORMATION
- This might be achieved by the use
of information so that
manufacturing and purchasing get
to hear of what is happening in the
marketplace faster than they
currently
INFORMATION ICEBERG
- Order Cycle Time
- Order
ACTUAL USAGE/DEMAND
- Below the surface of the iceberg
represents the on-going
consumption, demand or usage of
the product which is hidden from
the view of the supplier.
TWIN PRONGED APPROACH
- seeking to reduce the logistics lead
time whilst extending the
customer’s order cycle may never
completely close the lead-time
gap.
CAPACITY
- refers to the ability to access
supply not currently held as
inventory.
- Either way demand is balanced
with supply.
FULCRUM
- is the point at which we commit
to source/produce/ship the
product in its final form.
- The idea being that if that point of
commitment can be delayed as
long as possible then the closer we
are to make- to-order, with all the
benefits that brings.
VISIBILITY
- to improve the visibility of demand
along with enhancing the,
VELOCITY - of the supply chain.
DEMAND MANAGEMENT
- used to describe the various
tools and procedures that enable
a more effective balancing of
supply and demand to be achieved
through a deeper understanding of
the causes of demand volatility.
DEMAND PLANNING
- is the translation of our
understanding of what the real
requirement of the market is into
a fulfilment programme, i.e.
making sure that products can be
made available at the right times
and place.
SALES AND OPERATIONS PLANNING
- seeks to ensure that the
organization is able to anticipate
the real requirement of the
market and to react in the most
cost-effective way.
- The aim is to ensure the highest
level of customer satisfaction
through on-time, in-full deliveries
with minimum inventory.
VOLUME
- wherever possible these plans
should be made on the basis of
high-level aggregate volume
forecasts at the product family
level. As we get closer to the point
of demand fulfilment then we can
start to think about product mix
requirements.
 JOINT SUPPLIER BENEFITS:

- customer process to create a • REDUCE CAPITAL INVESTMEN

forecast is that a wider array of • DECREASE COST OF GOODS
intelligence can be taken into SOLD
account. • INCREASE SALES REVENUE

ROUGH CUT

- To ensure that there is enough • COLLABORATIVE PLANNING

capacity and resources available to
achieve the consensus forecast it
is necessary to produce a ‘rough
cut’ capacity plan – otherwise
known as a RESOURCE PLAN.
- forecasting and replenishment
(CPFR) is the name given to a
partnership-based approach to
managing the buyer/supplier
interfaces across the supply chain.

COLLABORATIVE PLANNING, • CONVENTIONAL

FORECASTING AND REPLENISHMENT REPLENISHMENT SYSTEM

VENDOR MANAGED INVENTORY - both sides need to carry safety

- is a process through which the
supplier rather than the
customer manages the flow of
product into the customer’s
operations.
stock as a buffer against the
uncertainty that is inevitable when
there is no visibility or exchange of
information.

- the need to carry safety stock is

greatly reduced as a result of
‘substituting information for
inventory’.

CPFR

- is in effect an extension of VMI in

that it takes the idea of
collaboration amongst supply chain
partners a step further.

- now, most CPFR initiatives

focused on reducing variable
costs, such as decreasing
inventory levels. However, there
are further benefits to be gained for
companies that integrate CPFR
into their standard operational
procedure and scale to critical
mass