Understanding Demand Management
Explain and apply the key concepts of logistics and supply chain management in public and private sector to ensure effective and efficient management of an organization.
In this report a discussion is going to be done regarding the topic of demand management. Several aspects of the demand management are going to be touched in this report. The relation of demand management with the supply chain agility is going to be done. The methods that are used by the public and private sector in demand management have also been done in the report. Some of the demand management models has also been attempted to be evaluated in the report.
As par Saad et al. (2012) the demand management is basically the entire aspect of making forecast regarding the demand, planning for the demand and managing the demand for products and services. Demand management can be estimated regarding an entire economy, a particular industry or a particular firm and the products and service within it. to ensure that demand management has been done it has be to ensured that the demand of the customer can be understood anticipated and influenced for a service and products that are being taken up in this case.
Research has been conducted by David M. Gilgor regarding the role of demand in supply chain agility. The research has been conducted from 1991 to 2013 on manufacturing organisations. The several elements of supply chain agility or SCA has been identified in this case.
The key findings of this article are that the agility frameworks that are followed in case of supply chain are often made on the assumption that the demand has been a known factor. It is not possible to make a holistic framework without knowing the actual amount of demand. This journal has also found that only ensuring that the manufacturing, procurement or distribution and ensuring flexibility in this is often not enough to achieve agility. There is an increasing need is demand and supply integration which is only possible through effective forecasting and demand management.
There are several benefits of demand management in actual management of organisation. First of all is that it is possible for an organisation to achieve competitive advantage in difficult market situation. Demand management also contributes in other fields like knowledge management (Stevenson and Hojati 2007). Knowledge management can help in forming a demand supply integration which is of practical benefit for an organisation.
Demand Management and Supply Chain Agility
The demand management strategy is the method that is used by an organisation to manage the level of demand in the market. There are different strategies that are adopted by government organisations and private organisation to manage the level of demand from the customer.
Public sector organisations: the chief methods that are used by the government to change the demand in the market are the interest rate. The changing of the interest rate is done by the government as par the monetary policy. There are two types of monetary policy the expansionary monetary policy that is used by the government is done to increase the demand in the market and the contraction monetary policy is used by the government to reduce the demand in the market as stated by Mohsenian-Rad et al. (2010). There are some government organisations that meet the excess demand by outsourcing some of its function to the private organisations. The government is responsible for the management of the aggregate demand in the market. This is done by the government to avoid events like recession which is a result of lack of effective demand management. The inflation rate in a country is also influenced by the demand in the economy according to Acharya (2013). The government is also responsible for the controlling of the rate of inflation. There are other factors that are controlled by the government to ensure the limiting of the demand that is the rate tax and public expenditure. Tax can be controlled by the government directly the public expenditure can also be controlled by the government indirectly as opined by Tcherneva (2012). However the government is reducing its responsibility in controlling of demand. The macroeconomic demand management responsibility has been taken up by the independent central banks within an economy.
Private sector organisation: in private sector organisation the demand for the products is mostly managed by a simple policy. When the supply is more than the demand the price is kept at a profitable rate. But when the demand is more than supply the demand is managed by the increase in price. The private sector organisation also managed the demand by effective forecasting as stated in the work of Lambert and Cooper (2000). There are other measures that are used by private organisations like time fences. In private sector organisation time becomes a keen issue in increasing the demand. The time fence serves a point of decision for private organisations. The work of Rexhausen et al. (2012) shows that it can be divided in 3 parts the future planning zone, trading zone and firm zone. The future planning zone is when the supply is manipulated to meet the demand. The trading zone is when the demand is manipulated to ensure that it is at par with the production and the firm zone is when the procurement supply is matched by the demand by manipulating it as stated by Priem and Swink (2012).
Demand Management Models
Fig 1 Demand Management
Source [Priem and Swink 2012]
Demand management can be done by using certain models. First it is of importance to study the pattern of demand as par Priem and Swink (2012). The service belt of the organisation has to be studied as par the business process and the service process scheduling the delivery pattern of the organisation. A capacity management plan has to be developed in case the increase in demand is a good sign and there is an essential need of fulfilling it. As par Warren (2014) in case it is important for the organisation to make sure that there are certain types of changes that are to be conducted in the point of the change in demand than incentives and penalties can be applied to make the necessary changes.
Fig 2 Forcasting model
Source [Stadtler 2015]
There are several methods that can be used by an organisation to forecast the demand which has been shown in this model. The methods can be classified in primarily three parts the survey method, statistical method and other methods. There are two parts in which the survey method can be applied first is by the estimate of the intention of the purchase and the second method is by reports that are generated by the sales forces as opined by Jaipuria and Mahapatra (2014). The intention of the buyer can be gauges either through census or sample.
The statistical method is another key aspect in which forecasting is done to control the demand in the market. First statistical technique that is used in making forecast involves the trend projection technique. This technique identifies the patterns that are present in the market regarding the demand of a particular product. The second common technique that is used is the barometric technique. The third method is the simulation method which replicates the behaviour of the market and thus forecast the possible demand. The last method is the correlation and regression techniques as shown in the work of Acar and Gardner Jr (2012). This technique associates the demand with other factors and predicts the demand by observing the associated incidences.
Some other methods that are used are qualitative means which has lesser amount of accuracy rate like expert opinion, test marketing, experiments and judgemental approach. These techniques are also sometimes applied in the market to estimate the possible demand (Russell and Taylor-Iii 2008). These methods are less systematic in comparison to the survey and statistical approach that is used.
Conclusion
In conclusion it can be said that demand management is one of the essential element in any demand and supply process. The demand management is interrelated with demand and supply chain in more than one ways. The demand management technique used by the public and the private organisation by using different techniques. Forecasting of demand is one of the key processes of demand management in operation of an organisation. There are other means as well that are used by the organisation to meet the demand. As forecasting plays a vital role there are several ways in which the forecasting is done in organised sectors. The two key method of forecasting is survey method and statistical method.
Reference list
- Acar, Y. and Gardner Jr, E.S., 2012. Forecasting method selection in a global supply chain. International Journal of Forecasting, 28(4), pp.842-848.
- Acharya, S., 2013. Dispersed beliefs and aggregate demand management. University of Maryland mimeo.
- Gligor, D.M. and Holcomb, M.C., 2012. Understanding the role of logistics capabilities in achieving supply chain agility: a systematic literature review. Supply Chain Management: An International Journal, 17(4), pp.438-453.
- Jaipuria, S. and Mahapatra, S.S., 2014. An improved demand forecasting method to reduce bullwhip effect in supply chains. Expert Systems with Applications, 41(5), pp.2395-2408.
- Lambert, D.M. and Cooper, M.C., 2000. Issues in supply chain management. Industrial marketing management, 29(1), pp.65-83.
- Gligor, D., 2014. The role of demand management in achieving supply chain agility. Supply Chain Management: An International Journal, 19(5/6), pp.577-591.
- Mohsenian-Rad, A.H., Wong, V.W., Jatskevich, J., Schober, R. and Leon-Garcia, A., 2010. Autonomous demand-side management based on game-theoretic energy consumption scheduling for the future smart grid. IEEE transactions on Smart Grid, 1(3), pp.320-331.
- Priem, R.L. and Swink, M., 2012. A demand?side perspective on supply chain management. Journal of Supply Chain Management, 48(2), pp.7-13.
- Rexhausen, D., Pibernik, R. and Kaiser, G., 2012. Customer-facing supply chain practices—The impact of demand and distribution management on supply chain success. Journal of Operations Management, 30(4), pp.269-281.
- Russell, R.S. and Taylor-Iii, B.W., 2008. Operations management along the supply chain. John Wiley & Sons.
- Saad, W., Han, Z., Poor, H.V. and Basar, T., 2012. Game-theoretic methods for the smart grid: An overview of microgrid systems, demand-side management, and smart grid communications. IEEE Signal Processing Magazine, 29(5), pp.86-105.
- Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management and advanced planning(pp. 3-28). Springer, Berlin, Heidelberg.
- Stevenson, W.J. and Hojati, M., 2007. Operations management(Vol. 8). Boston: McGraw-Hill/Irwin.
- Tcherneva, P.R., 2012. Permanent on-the-spot job creation—the missing Keynes Plan for full employment and economic transformation. Review of Social Economy, 70(1), pp.57-80.
- Warren, P., 2014. A review of demand-side management policy in the UK. Renewable and Sustainable Energy Reviews, 29, pp.941-951.
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