Lecture

Demand Management: Forecasting Methods

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In course

ME-419: Production management

Production management deals with producing goods sustainably at the right time, quantity, and quality with the minimum cost. This course equips students with practical skills and tools for effectively managing demand, supply, and implementing advanced anal ...

Description

This lecture covers the importance of demand management in production, focusing on forecasting methods to plan production and buffer stock against disruptions. It discusses the consequences, causes, and countermeasures of the bullwhip effect, using real-world examples like the Swiss watch industry. The instructor explains the characteristics of good demand forecasts, the steps involved in demand forecasting, and the different methods available, including quantitative and qualitative approaches. The lecture also addresses cognitive biases that can affect risk assessment in business decisions.

Instructor

Amin Kaboli

Dr. Amin Kaboli is an external lecturer for at the Mechanical Engineering Section at EPFL and teaches Production Management (ME-419), Continuous Improvement (ME-498) to graduate students and Digital Supply Chain, Innovation and Digitization, and Sustainable Change Leadership to business executives and managers at International Institute for the Management of Logistics and Supply Chain (IML). Amin supports many organizations ranging from Fortune 500 corporations to entrepreneurial firms and industries as diverse as Watch, Consumer Goods, Food and Beverage, MedTech, and Pharma. He obtained his Ph.D. in Manufacturing Systems & Robotics, specialized in Supply Chain Management from EPFL. You can watch his TEDx talk on “Leading Change Consciously” here. TEDx talk here.

Official source

Related concepts (25)

Demand forecasting

Demand forecasting refers to the process of predicting the quantity of goods and services that will be demanded by consumers at a future point in time. More specifically, the methods of demand forecasting entail using predictive analytics to estimate customer demand in consideration of key economic conditions. This is an important tool in optimizing business profitability through efficient supply chain management. Demand forecasting methods are divided into two major categories, qualitative and quantitative methods.

Forecasting

Forecasting is the process of making predictions based on past and present data. Later these can be compared (resolved) against what happens. For example, a company might estimate their revenue in the next year, then compare it against the actual results creating a variance actual analysis. Prediction is a similar but more general term. Forecasting might refer to specific formal statistical methods employing time series, cross-sectional or longitudinal data, or alternatively to less formal judgmental methods or the process of prediction and resolution itself.

Production planning

Production planning is the planning of production and manufacturing modules in a company or industry. It utilizes the resource allocation of activities of employees, materials and production capacity, in order to serve different customers. Different types of production methods, such as single item manufacturing, batch production, mass production, continuous production etc. have their own type of production planning. Production planning can be combined with production control into production planning and control, or it can be combined with enterprise resource planning.

Safety stock

Safety stock is a term used by logisticians to describe a level of extra stock that is maintained to mitigate risk of stockouts (shortfall in raw material or packaging) caused by uncertainties in supply and demand. Adequate safety stock levels permit business operations to proceed according to their plans. Safety stock is held when uncertainty exists in demand, supply, or manufacturing yield, and serves as an insurance against stockouts. Safety stock is an additional quantity of an item held in the inventory to reduce the risk that the item will be out of stock.

Material requirements planning

Material requirements planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes. Most MRP systems are software-based, but it is possible to conduct MRP by hand as well. An MRP system is intended to simultaneously meet three objectives: Ensure raw materials are available for production and products are available for delivery to customers. Maintain the lowest possible material and product levels in store Plan manufacturing activities, delivery schedules and purchasing activities.

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