Operations Management: Forecasting and Capacity Planning

How can a business cope with changes in demand for its goods or services? If demand falls below supply, the storage of unsold products will cost money, or staff and equipment will be idle.

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FAQs

The program includes, the following topics:

1. Operations Management and the Organization

2. Product and Service Management

3. Operations and Supply Chain Management

4. Inventory Management

5. Forecasting and Capacity Planning

6. Operations Scheduling

7. Management of Quality

8. Facilities Planning and Management

After completing this topic, you should be able to match customer demand trends with the patterns that illustrate them

Demand is a key factor in business, but it's not always constant. Suppose you manage operations at a company that distributes sun protection products to a broad geographic area, but half of that area has a shorter season of sunny weather. Ordering a constant supply of sun protection products will result in an oversupply in the winter months.

As an operations manager, it's your job to match supply with demand and fine-tune operations in order to optimize the use of resources. So it's important that you understand and forecast demand accurately. But how?

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The Characteristics of Demand

After completing this topic, you should be able to identify the major demand forecasting variables, recognize key concepts related to various demand forecasting models and methods and sequence the stages in the demand forecasting process.

To be able to fine-tune your production, you need to be able to forecast demand for your products. You can't rely on pure guesswork or chance. You must have more accurate methods for forecasting future demand.

When it comes to demand forecasting, there are four major variables that need to be taken into account: demand, supply, product characteristics, and the competitive environment.

Creating a demand forecast is a six-stage process. The stages are to establish the purpose of the forecast; select the items to be forecasted; determine the time horizon of the forecast; select the forecasting model; gather the data and make the forecast; and validate the results.

Now that you've learned about the six stages of the demand forecasting process, there is one stage that requires a bit more discussion. Stage four is to select a forecasting model. But when it comes time to do that, what models are available? And how do you decide between them?

Now that you've been introduced to the basic categories of demand forecasting methods, more can be said about some specific ones. Recall that the qualitative methods are expert opinion polls, Delphi technique, and consumer surveys, and that the quantitative methods are Time Series techniques and causal models.

Forecasting Demand

Use this to review details of the six stages of the demand forecasting process.

After completing this topic, you should be able to recognize the characteristics of strategies used to manage capacity

There are limits to capacity. A machine has a maximum output per hour, a truck has a maximum load, and a hotel has a certain number of rooms and employees.

Capacity management is about matching supply and demand. There are three kinds of capacity management strategies that organizations use to manage fluctuations in demand and supply: Level strategies, Chase Demand strategies, and Demand Management strategies.

An alternative to Level capacity management strategies is Chase Demand. Organizations that use Chase Demand strategies adjust their production to reflect fluctuations in actual demand.

Use this to review the characteristics of the three substrategies of the Chase Demand capacity management strategy.

Instead of passively anticipating or responding to the market, an alternative is to actively try to influence demand. Demand Management strategies try to smooth out the high and low ends of the demand curve by managing customer demand.

Use this to compare your company's capacity management strategy with the strategies discussed in this topic.

Managing Capacity

This course addresses the basics of demand forecasting and capacity management

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