CHAPTER 3:

DEMAND AND ORDER

MANAGEMENT
 LEARNING OUTCOMES

After completing this chapter, you should be able to

• explain demand management
• explain the basic forecast demand patterns
• explain the basic demand forecasting methods
• describe the “bullwhip effect” and impact on demand forecasting
• discuss the importance of sales and operations planning and collaborative
planning and forecasting replenishment
• examine the order management process and its components
• indicate how order fulfilment can be monitored and managed.
 INTRODUCTION

The main causes of demand variability within a firm include the following:
• Marketing and sales promotions
• Payment terms
• Order policies
• The complexity of the distribution network
• Lead time
• Supply constraints
 WHAT IS DEMAND MANAGEMENT?
Demand management is a approach in which managers attempt to customise their capacity to meet
changes in demand or to manage the level of demand using marketing and/or supply chain
management strategies.
PATTERNS THAT INFLUENCE DEMAND
FORECASTING
Figure 3.1 Patterns that influence demand planning
 PATTERNS THAT INFLUENCE DEMAND FORECASTING continued

Figure 3.1 Patterns that influence demand planning (continued)

 PATTERNS THAT INFLUENCE DEMAND FORECASTING continued

Figure 3.1 Patterns that influence demand planning (continued)

FORECASTING METHODS
Figure 3.2 Types of forecasting
methods
Source: Adapted from Heizer et al. (2017:
149–150)
FORECASTING METHODS continued

Figure 3.3 Bullwhip effect

Source: Salleh (2013)
 SALES AND OPERATIONS PLANNING

The sales and operations planning process

Step 1 Create a forecast
Step 2 Do a preliminary forecast
Step3 Prepare preliminary production plans
Step 4 Formal meeting with S&OP (managers of marketing,
production, procurement, financial and logistics departments
Step 5 Measure the results of the S&OP process
 COLLABORATIVE PLANNING AND
FORECASTING REPLENISHMENT

Typically, the CPFR process consists of four collaborative activities:

• Strategy and planning
• Demand and supply management
• Execution
• Analysis
 COLLABORATIVE PLANNING AND FORECASTING REPLENISHMENT continued

Model for the implementation of collaborative planning,

forecasting, and replenishment
Figure 3.4 VICS eight-step CPFR Model
Source: Voluntary Inter-Industry Commerce Standards (2004: 9)
ORDER MANAGEMENT
Figure 3.5 Stages in the order cycle
Source: Murphy & Knemeyer (2018: 132)
PERFORMANCE MANAGEMENT
Table 3.1 Common demand and order management performance measures
 PERFORMANCE MANAGEMENT continued

Table 3.1 Common demand and order management performance measures continued
 CONCLUSION

Matching supply with demand remains a challenge, with demand management and
forecasting being vitally important to any supplier of goods as it aims to eliminate
the gap between supply and demand.