Challenges - Demand Capacity Planning
Demand Capacity Planning is a delicate balance of long-term demand and supply constraints
You have to understand where you’ve been to truly know where you’re headed. Understanding future demand for products is a critical element of an effective demand planning strategy. Production capacity, supplier selection, and transport network architecture, very much depend on reliable forecasting values. Yet, so many decisions executed by today’s manufacturing companies are siloed and based on outdated, unaligned information sources. This not only leads to long decision paths, but it also results in misalignments in procurement, poor strategic network performance, and production bottlenecks or breakdowns. In addition, this also results in missing links between product strategies and material needs, which causes major misalignments between product strategies and the supplier world.
Even though manufacturing companies understand increasingly their long term needs for a stable production plan, many of today’s manufacturers do not understand value of an early integration of the supplier world.
By introducing more complex structures of value chains, forecasts for the supplier world get more important, then it was before. Delivery constraints in the supplier world need to be addressed already in early stages. Forecast horizons are relevant for purchasing decisions to generate best purchase prices, to secure product quality and to secure material supply.
As a result, manufacturing companies can experience:
- Inventory misalignments including shortages and overages.
- Poor job allocation based on facility capacity and access to manufacturing materials.
- Inaccurate sales or production projections.
- Increased costs due to rush orders, job reassignments, disruptions in supply and product workflow, and increased manpower.