Customer Demand
Customer Demand
Customer Demand
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Topics to be covered
Demand
management
and
Customer Service
Outbound to customer logistics
systems
Demand Management
Traditional forecasting
CPFRP, Customer Service
Expected cost of stockouts
Channels of distribution
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Demand Management
Demand
Supply Demand
Misalignment
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Traditional Forecasting
A
12-month
forecast (by
month)
Revised
forecast
Gross market
requirements (1
to 3 year
periods)
Aggregate
production
schedules (12
months)
Allocation of
aggregate
requirements
to plants
Short-term
production
scheduling
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Purposes of forecasting
Long-term
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Development
The
Collaborative Planning
Collaborative
demand planning
Synchronized
Order fulfillment
Joint Capacity
planning
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order
Enter order manual/electronic
Verify and check order for accuracy
Check credit
Check inventory availability
Process back order
Acknowledge order
Modify order
Suspend order
Check pricing and promotion
Identify shipping point
Generate picking documents
Originate shipment
Inquire order status
Deliver order
Measure service level
Measure quality of service
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When
referring
to
outbound-tocustomer shipments, we typically use
the term order cycle. The term
replenishment cycle is used more
frequently when referring to the
acquisition of additional inventory, as in
materials management. Basically one
firms
order
cycle
is
anothers
replenishment cycle.
Order
Order
Order
Order
Major
components
of
Order
Cycle
preparation
shipment
processing
placement
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Order
Customer Service
Having
Promotion
Place/Customer
service levels
Inventory
carrying costs
Lot quantity
costs
Transportati
on costs
Warehousin
g costs
Order
processing and
information
costs
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1.
2.
3.
Communications
Order
time
cycle
Distribution
system
flexibility
Brief
Description
Usually defined as percent
in
stock
(target
performance
level)
in
some base unit (i.e. order,
product, dollars)
Elapsed time from order
placement to order receipt.
Usually measured in time
units and variation from
standard or target order
cycle
Ability
of
system
to
respond to special and/or
unexpected
needs
of
customer.
Typical
Measurement
Unit
% availability
in base units
Speed
and
consistency
Response
time
special
requests
to
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Distribution
system
information
Distribution
system
malfunction
Postsale
product
support
Ability
of
firms
information system to
respond in timely and
accurate manner to
customers
requests
for information
Speed, accuracy
and
message
detail
of
response
Efficiency of procedures
Response
and
and time required to
recovery
time
recover
from
requirements
distribution
system
malfunction (i.e. errors
in
billing,
shipping,
damage , claims).
Efficiency in providing
Response
product support after
time, quality
delivery,
including
of response
technical, information,
spare
parts,
or
equipment
modification,
as
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principal
benefit
of
inventory
availability and, hence of customer
service is to reduce the incidence of
stockouts.
Once
we
develop
a
convenient way to calculate the costs
of a stockout, we can use stockout
probability information to determine
the expected stockout cost. Last, we
can analyse alternative customer
service levels directly by comparing
the expected cost of stockouts with the
revenue
enhancing
benefits
of
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Effects of stockouts
A
stockout occurs when desired
quantities of finished goods are not
available when and where a customer
needs them. When a seller is unable to
satisfy
demand
with
available
inventory, one of four possible events
may occur:
1. The customer waits until the product
is available
2. The customer back orders the product
3. The seller loses a sale
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Back Order
Lost sales
Most firms find that although some customers may
prefer a back order, others will turn to alternative
supply sources.
Most companies have competitors who produce
substitute products; and when one source does not
have an item available, the customer will order that
item from another source. In such cases, the stockout
has caused a lost sale.
The sellers direct loss is the loss of profit on the item
that was unavailable when the customer wanted it.
Thus, a seller can determine direct loss by calculating
profit on one item and multiplying it by the number the
customer ordered. For eg. If the order was for 100 units
and the profit is Rs. 10 per unit, the loss is Rs 1000.
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Lost Customer
The
customer
permanently
switches to another supplier. A
supplier who loses a customer
loses a future stream of income.
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Channels of Distribution
A
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Types of Channels
Managing distribution channels requires firms
to coordinate and integrate logistics and
marketing activities in a manner consistent
with overall corporate strategy.
Logistical channel refers to the means by
which products flow physically from where
they are available to where they are needed.
Marketing channels refers to the means
by which necessary transactional elements
are managed. (e.g. customer orders, billing,
accounts receivable etc.)
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Transportati
on
National
account sales
Manufacturer
Transportati
on
Wholesaler/
Distributor
Distribution
center
Retail
customer
Transportati
on
Retail store
Consumer
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Restauran
ts
Grocery
wholesalers
Specialty
(airlines
etc.) Retail
chains
(local and
regional)
Retai
l
groc
ers
Food
brokers
Instituti
onal
buyers
Internet
(direct)
Retail
chains
Intern
et
retaile
r
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Thank
You
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