Lean Definition

Demand Management

Demand Management works best when there is a uniform flow of products within the system. While a company’s policies should encourage stability, unfortunately, that is not always the case. For example, a reward system for product sales might encourage a spike in manufacturing demands at the end of each month. If signals are ready incorrectly, it can lead to supply chain problems in the form of an inaccurate product forecast. Accounting procedures can encourage management also to produce excess inventory in order to make the number on which they are evaluated look better.

Supply chain improvements can be expected when lead times are reduced, which would improve forecasting accuracy, and when there is a sharing of supply chain information that leads to an agreement to uniform schedules. Another opportunity is to change internal policies that impact demand volumes. For example, consider an end- of- the- month/quarter sales-target bonus policy that results in the Sales department giving temporary price concessions so that they meet their monthly/ quarter sales targets. This policy could be a candidate for change, since the sales- force reward policy may be causing a manufacturing demand peak that leads to much overtime and quality issues.

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