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Materials management - Introduction (Eighth edition): Part 2

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(BQ) Continued part 1, part 2 of document Materials management - Introduction (Eighth edition) has contents: Forecasting and demand management, inventory fundamentals, order quantities, independent demand ordering systems, physical inventory and warehouse management, physical distribution,. and other contents. Invite you to refer. | CHAPTER EIGHT FORECASTING AND DEMAND MANAGEMENT INTRODUCTION Forecasting is a prelude to planning. Before making plans an estimate must be made of what conditions will exist over some future period. How estimates are made and with what accuracy is another matter but little can be done without some form of estimation. Why forecast There are many circumstances and reasons but forecasting is inevitable in developing plans to satisfy future demand. Most firms cannot wait until orders are actually received before they start to plan what to produce. Customers usually demand delivery in reasonable time and manufacturers must anticipate future demand for products or services and plan to provide the capacity and resources to meet that demand. Firms that make standard products need to have saleable goods immediately available or at least to have materials and subassemblies available to shorten the delivery time. Firms that make to order cannot begin making a product before a customer places an order but must have the resources of labor and equipment available to meet demand. Many factors influence the demand for a firm s products and services. Although it is not possible to identify all of them or their effect on demand it is helpful to consider some major factors General business and economic conditions. Competitive factors. Market trends such as changing demand. The firm s own plans for advertising promotion pricing and product changes. DEMAND MANAGEMENT The primary purpose of an organization is to serve the customer. By effectively serving customers the company will often be successful leading to what financial people identify as a primary purpose of maximizing company shareholder value. Marketing focuses on meeting customer needs but operations through materials management must provide the resources. The coordination of plans by these two parties is demand management. Demand management is the function of recognizing and managing all demands for products and or services.

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