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Comprehensive Review of Demand Management and Planning in Supply Chains
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Review of Supply Chain Literature
This thorough overview of the literature emphasizes important elements of supply
chain management, including different demand types, sales and operations planning, master
production scheduling, and the appeal of manufacturing and outsourcing for businesses.
Demand
Dependent Demand
When a product’s demand is directly connected to or generated from the demand for
another good or service, according to Hugos (2011), it is said to be reliant. According to
Aswathappa and Shridhara (2009), dependent demand occurs when the requirement for a
good, raw material, or component depends on the demand for the finished product that uses
those elements. Dependent demand is further divided by Hugos into vertical and horizontal
dependence. The difference between the two is that in the latter, the part is essential to the
finished product. In the former, the component is required to build a subassembly or product.
A product handbook is a prime illustration of a good that is susceptible to dependent demand.
It’s important to remember that dependent demand accounts for a significant fraction of the
entire inventory of raw materials, component components, and subassemblies (Thuynsma,
2016). Since dependent demand can be precisely computed from the demand for the things it
supports, it often doesn’t need forecasting to the same degree as final products. Dependent
demand should not be managed individually but rather as a crucial component of the larger
production plan, as Hugos (2011) emphasizes.
Independent Demand
According to Hugos (2011), independent demand is the desire for a good or service
that is unconnected to the demand for other goods or services in the inventory. Independent
demand cannot be computed or deduced from the demand for other items, in contrast to
dependent demand. Forecasting is necessary for independent demand since it allows for the
individual forecasting of order amounts for each inventory item (Benton, 2014). Independent
demand, as opposed to dependent demand, depends on statistical inventory control to manage
stock inventories. End goods are an example of independent demand since their demand is set
by clients outside the company (Aswathappa & Shridhara, 2009).
Lumpy Demand
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Materials are described as being prone to lumpy demand by Aswathappa and
Shridhara (2009) when there are considerable fluctuations in demand from one time period to
the next. The phrase “lumpy demand” refers to a production process that is intermittent and
non-uniform, with periods of high inventory demand and periods of low demand (Roy, 2005).
Materials with lumpy demand are similar to dependent demand in that they are well-suited
for management utilizing MRP methodologies (Roy, 2005).
Sales and Operations Planning
Definition of Sales and Operations Planning
According to Blanchard (2010), sales and operations planning (S&OP) unifies all of
an organization’s business plans, including customer, sales, marketing, R&D, manufacturing,
sourcing, and financial plans, into one integrated set of plans. By concentrating on aggregate
quantities, such as product families and groups, this technique tries to strike a balance
between supply and demand while also making it simpler to handle specific items and client
orders (Croxton et al., 2002). This collaborative process takes place at several organizational
levels, including senior leadership like the CEO, and includes general management, sales,
operations, finance, and product development (Hugos, 2011).
Function of Sales and Operations Planning
For the best alignment of supply and demand, S&OP is utilized on a regular basis to
analyze consumer demand for different goods and sources of supply (Hugos, 2011). A strong
S&OP provides useful insights into the company’s effectiveness in balancing supply and
demand and enables management to understand and adjust to changes in the industrial
environment (Hugos, 2011). With a monthly cycle, this iterative technique offers accurate
estimates for the next six to eighteen months, continuously modifying plans in response to
shifting demand (Blanchard, 2010). The main objective is to maintain top-level management
plans and specific sales, production, buying, and capacity planning systems in sync, which
will eventually result in more precise supply and demand forecasts (Blanchard, 2010).
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Master Production Scheduling
Definition of Master Production Scheduling
The main instrument for managing product availability is Master Production
Scheduling (MPS) (Jonsson, P., & Ivert, 2015). It is essential for tying together production
and marketing (Aswathappa & Shridhara, 2009). The master scheduler plays a crucial role in
high-performance enterprise resource planning (ERP) companies (Sheldon, 2006). According
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to Aswathappa and Shridhara (2009), MPS reflects the breakdown of the overall plan and
specifies the quantity of each end item to be finished in a certain amount of time or the total
number of final goods the company intends to produce in each period. What will be
produced, how many units will be manufactured, and when they will be made are all clearly
stated (Drake, 2014).
According to Aswathappa and Shridhara (2009), MPS development comprises regular
evaluations of market projections, orders, inventory levels, facility loading, and capacity data.
To drive all planning components, including resources, labor, equipment, and finance for the
facility, it integrates expected needs, backlogged client orders, and the available-to-promise
(ATP) amount (Drake, 2014). According to Aswathappa and Shridhara (2009), the MPS is a
strategy for ensuring supply and demand are balanced. It typically lasts from a few weeks to
several months.
Objectives of Master Production Scheduling
Transforming general plans into precise end products is one of MPS’s primary tasks
(Aswathappa & Shridhara, 2009). It allows the marketing and sales teams to provide ultimate
customers and field warehouses with verified delivery guarantees (Benton, 2014). As a result,
one of the key goals of MPS is to plan out end products so that they are completed quickly
and in accordance with the delivery timetables that were promised (Aswathappa & Shridhara,
2009). Additionally, MPS provides the data necessary for marketing and production teams to
make judgments when faced with overloading or underloading of production. According to
Aswathappa and Shridhara (2009), these choices are made to guarantee the effective use of
manufacturing capacity while reducing production costs. So, in conclusion, MPS is
continuously maintained to preserve a balance between stability and responsiveness (Benton,
2014).
Time Interval and Planning Horizon for MPS
The lead times and product characteristics will determine the planning horizon for
MPS (Aswathappa & Shridhara, 2009). Accordingly, the planning horizon for MPS must be
at least as long as the lead time needed to manufacture the MPS products (Benton, 2014). It
includes all components that have been bought and put together, and it might take anything
from a few weeks to a year or more (Aswathappa & Shridhara, 2009). The lead periods for
manufacturing and final assembly are directly related to the planning horizon. The acceptance
of orders may vary depending on whether a product is in stock or created to order. The final
assembly schedule (FAS), which is part of the planning horizon, is often used as a time
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barrier (Benton, 2014). Once in the FAS, there is little room for adjustment and only extreme
situations allow for adjustments.
The time horizon is further divided by Aswathappa and Shridhara into four segments:
frozen, solid, full, and open. Due to the tremendous expenses involved in changing plans and
promises, the “frozen” portion is stiff and can only be modified by the highest echelons of the
company. Orders may still be accepted outside of the time barrier since main subassemblies
and components are not locked into certain end-item configurations (Benton, 2014).
Additional breakdowns are also available for time periods outside the FAS. Changes are
allowed under certain circumstances under the “firm” clause. According to Aswathappa and
Shridhara (2009), the “full” section indicates that all available manufacturing capacity has
been dedicated to orders, leaving no space for additional changes. The “open” portion
suggests that some remaining manufacturing capacity still has room for new orders to be
accepted.
Outsourcing and Remanufacturing
Outsourcing
According to Aswathappa and Shridhara (2009), outsourcing is the process of
acquiring products or services from outside sources as opposed to managing them internally.
It entails the full transfer of a business process from an external organization that is
independently owned and operated to one that was previously controlled internally (Benton,
2014). The cost savings must be much larger than the existing direct operating expenses for
outsourcing to be an effective strategy (Benton, 2014).
Beyond cost savings, outsourcing has other benefits. Outsourcing may be attractive to
businesses because it offers the possibility of better, more affordable, or more effective
products or services. Additionally, it may increase general flexibility and provide access to
materials covered by patents (Aswathappa & Shridhara, 2009). According to a Booz Allen
analysis, business process outsourcing will continue to rise in the US (Benton, 2014).
Outsourcing has a variety of benefits, some of which include cost reduction,
concentration on core skills, enhanced operational performance, and growing market share,
and revenue (Benton, 2014). However, outsourcing has certain hazards, such as a loss of
control, a greater reliance on suppliers, and a reduction in internal competencies (Aswathappa
& Shridhara, 2009). According to reports, between 25% and 34% of CEO budgets are
reportedly set aside for outsourcing (Benton, 2014). It’s important to keep in mind, however,
that not all outsourcing initiatives are successful; 20% to 25% of outsourcing contracts
collapse within the first two years (Benton, 2014).
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References
Aswathappa, K., and K. Shridhara B. (2009). Production and operations management.
Global Media
Benton, W. (2014). Supply chain focused manufacturing planning and control. Stamford, CT:
Cengage Learning.
Blanchard, D. (2010). Supply management best practices. Hoboken, NJ: John Wiley and
Sons, Inc.
Croxton, K. L., Lambert, D. M., García-Dastugue, S. J., & Rogers, D. S. (2002). The demand
management process. The International Journal of logistics management, 13(2), 5166.
Drake, M. (2014). Global supply chain management. New York: Business Expert Press.
Graham, G. (2015). Exploring supply chain management in the creative industries.
Emerald
Hugos, M. H. (2011). Essentials of supply chain management. Hoboken, NJ: John Wiley &
Sons, Incorporated.
Jonsson, P., & Ivert, L. K. (2015). Improving performance with sophisticated master
production scheduling. International Journal of Production Economics, 168, 118-130
Publishing Limited.
Roy, R.N. (2005). A modern approach to operations management. New Delhi: New Age
International Limited, Publishers.
Sheldon, D. (2006). World Class Master Scheduling: Best practices and lean six sigma
continuous improvement. J. Ross Publishing
Thuynsma, I. F. (2016). The Use of Radio Frequency Identification Technology to Improve
Inventory Management Practices. University of Johannesburg (South Africa).
Research Proposal Instructions and Guidelines
Your research proposal topic must be the same as your literature review.
The research proposal is divided into two parts:
1- The proposal that you upload on Blackboard (worth 20 points).
2- A PowerPoint to be used for your presentation (worth 10 points).
A homework link will be reflected on the course’s Blackboard page.
This research proposal must be uploaded on Friday November 30th at 9
p.m. Points will be deducted for late submissions.
The proposal has to include the following headings:
• Introduction and importance of your research subject.
• Research Questions.
• You do not need to include your literature review as you already
have done it.
• Hypothesis and Methodology.
• Research Design.
• References.
Your research proposal must be written as per the following:
• Introduction and importance of your research topic
• 4 pages for the review and the 5th page for references.
• APA citation style.
• 12 size Times New Roman font.
• 500 words per page (except the reference page).
• Your work will be checked for plagiarism. Thus, any plagiarism in
your work will result to a Zero for this assignment.
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