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Case Study: Driven By Demand
- What is a demand-driven supply chain? How is it different from a forecast-driven supply chain?
a)A Demand-driven supply chain is one methodology of provide chain management that involves building provide chains in response to demand signals. The most force of Demand-driven provides chain management is that it's driven by customers demand. As compared with the standard provide chain, Demand-driven provide chain management uses the pull technique. It offers Demand-driven provide chain market opportunities to share a lot of info and to collaborate with others within the provide chain.
Demand-driven supply chain management uses a capability model that consists of 4 levels. The primary level is reacting, the second level is Anticipating, the third level is Collaborating and therefore the last level is orchestrating. The primary 2 levels concentrate on the inner provide chain whereas the last 2 levels target external relations throughout the Extended Enterprise
b) Demand driven is that the use of user consumption to create provides chain choices. The choice to demand driven is forecast driven. The degree to that a provide chain is either forecast or demand driven is measureable as a share of choices that are demand driven instead of forecast driven. Common terms are push for forecast driven, and pull for demand driven.
Many managers pursue the goal of being demand driven instead of forecast driven. This implies that choices on the corporate provide chain is supported actual instead of forecasts of finish users’ demand.
While a lot of ancient forecast driven provide chain will usually harm a company’s name, financials and capitalist confidence, a well-architected demand-driven provide chain becomes a property market advantage that permits you to considerably surpass your competitors in client service, operative prices, and free income.
- How did the new supply chain positioning help NMS to streamline its supply chain operations and solve its problems related to its forecast-driven structure?
NMS recognized that it required varying its positioning so as to contour offer chain operations. Rather than being within the middle handling the physical merchandise, NMS needed to take a seat higher than the provision chain, orchestrating and watching its daily performance. The corporate conjointly needed to produce visibility across the provision chain for each itself and its commerce partners. This might permit NMS to target its core competencies—design engineering and provide chain management, not offer chain execution. This locating would conjointly solve the matter of measurability. Beneath the recent model, growing the corporate meant adding folks and/or facilities in testing, deposit, distribution, shipping, and transportation. The new model scales a lot of simply, requiring fewer extra resources to support growth.
The new forecast system conjointly helps in managing procure and provision. Add tools to manage
Demand exploitation rating, promotions and alternative client incentives. As a result of these tools square measure quite new, it’s taking a while to integrate them absolutely into the provision chain, Effective
Demand shaping helps firms to focus on their most profitable customers and promote their most profitable merchandise and services, boosting rock bottom line from either side. Really this approach permits firms to cut back quality and manage it higher. The new system change firms to use the complete array of levers at their disposal—including rating, sales incentives, promotions and alternative promoting vehicles—to form and manage demand to maximize profits.
- In order to implement a build-to-order (BTO) strategy, which business practices needed to change as revealed by the quantitative analysis? Why?
The first was lead times. Underneath the previous system, NMS would quote a customary lead-time of thirty days for all orders. Delivery would then occur in anyplace from ten days to thirty days or additional counting on the supply of the things. Underneath the new approach, once system implementation is completed, lead times can disagree counting on the merchandise and also the order size. It’s helpful to get most profit and to satisfy your customers.
Look at customers shopping for patterns, as well as each the daily order stream and also the quarterly pattern of demand. Rather than showing the same flow of enormous orders, the associate degree analysis discovered an erratic pattern of largely little orders, as well as several for one unit of 1 product.
Forecast accuracy was poor—under fifty % at the SKU level. During a BTO system, the forecast is employed principally to pre-position raw materials and to predict rough capability desires. Forecast accuracy at the raw materials level is affected considerably by half commonality. Elements with high commonality profit by the law of enormous numbers; that's, some ending forecasts square measure too high, others too low, however the errors tend to cancel one another out. On the opposite hand, forecasts for distinctive elements may be, and infrequently square measure, extremely inaccurate. There’s required to form improvement in their forecast system to run business effectively.
There is required to alter in inventory flip system. NMS can ne'er build product unless forced to try to therefore by a client order. However once it will got to build product, it'll build enough to each satisfy the order and to depart one “lot” sitting on the shelf. A lot for a cheap product is seven days of offer, or a minimum of fifteen units. Lots for a high-cost product are 3 days of offer, or a minimum of 5 units. In order that they will manage their inventory in well manner in line with wants and demands of consumers.
- What are the three major supply chain processes that NMS redesigned to move from a forecast–driven to a BTO system? How? Does moving to a BTO system make forecasting less important?
Moving from a forecast-driven to a build-to-order system meant redesigning 3 major offer chain processes:
- New launching
- Demand designing
- Order management
The new launching method was fraught with delays, incomprehensible communications, and frustration. New method featured abundant frequent data exchange. The goal is currently to use a work flow engine to manage these data exchanges. The team expects that the new method can shave six weeks off of the time needed to bring a brand new product through development and testing. Product quality is also expected to boost.
The demand designing method had major issues. The project team lay out the as-is method, known the issues, and conjointly created a brand new demand designing method. This improved method, which is able to be supported by new demand designing and provide chain designing package, incorporates frequent time period communications between NMS sales, NMS operations, and SMTC as they iteratively develop the ultimate demand set up. Simulations are used incessantly to work out the probability of changes to the demand set up.
Order management in all probability modified the foremost. Before the switch to build-to-order, SMTC made assemblies to a forecast and shipped them to stock at NMS. Within the new method, orders get NMS. When staff run a rapid credit check and applies a maturity stamp, the orders square measure at once announce to an online website visible to SMTC. The contract manufacturer will monitor the flow of client orders in close to real time, sanctioning it to set up consecutive day’s production effectively.
Moving to a BTO system build foretelling smaller as a result of With new offer chain designing package and with their databases synchronic, NMS and SMTC will currently quickly simulate the impact of taking giant or uncommon orders. If there's a retardant in accommodating the order, each firm will see the cause at once and if raw materials square measure restricted, they'll see that different client orders square measure competitive for those elements. This capability permits NMS to quickly respond back to customers with decisions.
- What are the manufacturing challenges in moving to a BTO system?
Build to order (BTO) and generally spoken as build to order (MTO), could be a production approach wherever merchandise aren't engineered till a confirmed order for merchandise is received. The foremost technically difficult changes concerned in moving to a build-to-order system were in producing. Makers are shifting from production to mass customization.
These changes rotated around however producing it was done, however production programming was done, however prototypes were engineered, and the way raw materials were managed.
The biggest challenge is making flow once the programming purpose, with the result being a foreseeable lead time that delivers what the client desires after they need it,
The contract manufacturer required to scale back the transition time to but one hour to stay up with actual client demand.
Another producing drawback was that new product prototypes were engineered on a similar surface-mount line as production runs of revenue-generating merchandise.
Raw part availableness becomes the essential issue once the buffer stocks of finished and work-in-process inventory are removed. BTO solely works if the raw materials are there after you want them.