Why Analyze Variability?
The impact of demand variability has large implications on how to properly manage operations. Significant profit increases can be achieved by preparing for variability. Supply chain managers have listed demand variability as the top challenge to efficiently and effectively managing supply chains and there are mathematical ways to create the most value.
Variability can determine influence supply chain strategy, production schedules, and inventory requirements, capacity requirements, and various other aspects of your supply chain.
What is demand variability?
Demand variability is the changes in demand from period to period. Each period can be defined by its appropriateness. Demand variability is also the result of trend, seasonality, events, and noise.
How do you compensate for variability?
- Drive the supply chain from real demand
- Consider different demand outcomes using probability and scenario analyses as part of planning processes, starting with the S&OP process.
- Incorporate automated segmentation and classification capabilities along with dynamic demand response capabilities into the forecasting process.
- Continuously evaluate response buffer strategies to ensure they are aligned with customer segmentation and associated demand variability.
- Provide end-to-end and linked demand-supply visibility to deal with demand volatility as plans are executed.
- Synchronize demand management processes with supply management processes.
- Use the synchronization described above to employ demand shaping strategies.
- Incorporate a learning framework to gain insights into variability and volatility.
- Close the loop between variability management and volatility management.
- Continuously improve processes to reduce lead times and process variability.
Factors that Effect Demand Variability
- New Product Launch
- Product Proliferation
- increase in specialize retail programs
- increased competition
- Rapidly changing customer preferences