Demand Management and Customer Service

Monitoring Forecast: Alerts the forecaster when the forecast accuracy is going out of control. Forecaster takes appropriate action: 1. Tracking Signals: Detect forecast Bias 2. Demand Filter: Identify unusual demand that exceed predetermined upper and lower control limits Accountability for the forecaster is ESSENTIAL Reasons for Forecast Inaccuracy: Too Difficult to Understand: forecasting tool is too difficult to understand/complex Lack of Participation Lack of Compatibility: between the forecasting tool and the organization techniques not understood/results not trusted, wont be followed. Inappropriate forecasting method Data may be Inaccurate (garbage in garbage out) Some Data are Inappropriate: Dependant demand is NOT forecasted Lack of Monitoring Forecast Accuracy: Forecast Accuracy % = 100 % Forecast Error % Measurements: o Period Forecast Error Forecast Error = Actual Demand Forecast Demand o Absolute Percentage of Error (APE)

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A = Actual Demand F = Forecast Demand o Mean Absolute Deviation (MAD) The average amount by which the forecast was in error All else being equal the forecasting method with the smallest MAD would be used.

o Mean Absolute Percentage of Error (MAPE) o Standard Deviation

o Standard Deviation

 Data points < 30? Use Data points > 30? Use e.g. and Mean = 500 Range fall within 267 733 1: 68.26% of observations fall within the range (in example: within 267 733) 2: 95.44% of observations fall within the range (recalculate with 2) 3: 99.74% of observations fall within the range (recalculate with 3) Relationship between MAD and Standard Deviation:

o Bias: Consistent deviation from the mean either negative or positive.

Positive Bias? Forecast is constantly too low Negative Bias? Forecast is constantly too high

o Tracking Signals: Used to measure forecasting bias

o Demand Filters
Quantity limit setting; when actual demand exceeds the forecasted demand by more than a specified number of mean absolute deviations Process for setting Demand Filters: 1. Select appropriate items with the need for a demand filter (items with heavy demand or long lead times) 2. Set filter at specific level per management policy (e.g. one months production) 3. Assign responsibility to a planner (he/she reviews demand filter defaults every day) 4. Discuss and agree on a planned order schedule with the customer 5. Track demand filters separately

6. Analyze opportunity for capacity increase for items that consistently trip their demand filter Process for developing a forecast: 1. Form team (marketing, sales, materials managers, etc..) 2. Establish policy 3. Group like items into families 4. Identify demand characteristics of product 5. Determine product life cycle stage 6. Classify items into categories based on revenue (usually A, B, and C items) 7. Invest in forecasting software 8. Load up to 36 months of sales history (for new items, use history from a like product) 9. Examine, modify, or purge sales history by item 10. Run the forecasting module 11. Obtain forecasts by family and item from team (these should identify special events that can impact the forecast) 12. Develop planning bills 13. Generate rolling forecasts for 13 months or more 14. Monitor forecast through bias checks, tracking signals, and demand filters 15. Work with the forecast, not against it

Customer Relationship Management (CRM) Order Processing Supplier requested changes Substitution products Change orders Order entry accuracy Customer returns Customer Order Management Accurate database Effective and easy entry systems Accurate product of service availability information Rapid processing Allocation Order confirmation Reliable delivery Order Management: Directing, monitoring, planning , and controlling processes related to customer order, manufacturing orders, and purchase orders

Order Service: Receiving, entering, and promising orders from customers, distribution center, and interplant operations. Dates Most current dates must always be entered into the planning system Must be valid (cant be in the past) and realistic Customer service must be measured based on the requested date from the supplier Due date changes by customer request must be recorded in system Changes due to supplier constraints must be communicated to the customer Quick Response (QR) Ability to respond quickly to customers with the proper products, quantities, price and location at minimum cost. Technological Elements of Quick Response (QR) o Automatic replenishment o Forecasting/planning systems o Inventory management systems o E-Commerce o Streamlined distribution center processing o Automated point of sale data o Shipping container marking: Bar coding Monitoring Order Status Accurate and Timely Data Priorities management Performance measurement Processing of changes Re-planning Demand Management Key: balance predicted sales activity with actual customer orders Order Promising Available-to-promise: Whats leftover after all the known customer orders h ave been filled. This is whats available to promise to another customer. Products and other end items Capable-to-promise: What are we able to make based on raw materials, lead times, and capacity? Service parts Services: based only on available capacity Customer Service

Defining o Addressing the needs, inquiries, and requests from customers o A measure of the delivery of a products/service to the customer at the requested time o Meeting/Exceeding expectations of the customer Elements o Responsiveness o Reliability o Courtesy o Competence o Credibility o Security o Access o Lead Time o Understanding Expectations o Communication

Sales Cycle Three Phases: 1. Pre-Sales: Focus on customer expectations 2. Sales: 3. Post-Sales: claims, complaints, returns, replacements, repairs, etc Customer Service Leadership Defined Vision High Standards Being Proactive with customers Modeling Action Oriented behavior Set Service goals Customer Service Education for all employees Monitoring service performance targets Customer surveys Integrity Customer Communications: Remember service perception is the reality in the eyes of the customer Treat every customer with respect Acknowledge a customer order with a fast promise date Communicate all changes in a timely manner regarding the commit date Tell the truth, even if its bad Explain difference between customer requested date and order promise date (if any)