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Supply Chain Management

Balancing Supply & Demand in Supply Chain Mgmt

29 January 2023
In this close-up image of a machine, there is a woman smiling at the camera near the bottom of the frame. In the upper right corner of the image, there is a close-up of a container. At the center of the frame, there is a close-up of a vehicle. On the left side of the image, there is a black background with white text. Below the text, there is a close-up of a wheel. In the lower right corner, there is a wooden boat with a glass roof. At the top of the image, there are two white letters on a black background. The first letter is an “X” and the second is a “D.” The machine is surrounded by a variety of objects that all add to the complexity of the image.
ApproachDescriptionAdvantages/Disadvantages
Stocking Production on OrderThis approach is based on forecasting how much customers will buy, driving all production and distribution planning. Products are made ready to ship before customers place an order.Advantage: Ensures goods are readily available for customers, reducing wait time. Disadvantage: Risks of overproduction and holding excess stock.
Engineer Made to OrderThis approach involves having all production and distribution services on standby, waiting for the order to arrive. Production doesn’t commence until the order is received.Advantage: Minimizes the risk of overproduction and holding excess inventory. Disadvantage: May lead to longer wait times for customers.
Build-to-OrderThis is a variant of the made-to-order approach where the product is customized based on the customer's specifications.Advantage: Allows for high customization for customers. Disadvantage: Requires a responsive supply chain, can be costlier and time-consuming.
Balancing Supply and DemandThis is the overall goal of every supply chain management strategy which involves ensuring that there's an alignment of your supply with customer demand.Advantage: Leads to efficiency and customer satisfaction. Disadvantage: Achieving this balance, requires accurate forecasting and flexible supply chain operations.
Supply Chain EfficiencyThis involves minimizing costs and time in the supply chain while maximizing the service level delivered to customers.Advantage: Increases profitability and customer satisfaction. Disadvantage: Requires continuous monitoring and optimizing supply chain operations.
Customer SatisfactionThis focuses on meeting or exceeding customer expectations in terms of product availability, delivery times, and after-sales service.Advantage: Leads to repeat business and building a loyal customer base. Disadvantage: Requires a responsive and efficient supply chain.
ForecastingThis involves predicting future demand for products based on historical sales data, market trends, and other factors.Advantage: Helps in planning production and inventory management. Disadvantage: Uncertainties and inaccuracies in forecasting can lead to overproduction or stockouts.
Inventory ManagementThis involves keeping track of stock levels and ensuring that the right quantity of products is available at the right time to meet customer demand.Advantage: Prevents stockouts and overstocks. Disadvantage: Requires accurate forecasting and efficient inventory management practices.
Production PlanningThis involves planning and controlling all the processes involved in producing goods, from raw materials to the finished products.Advantage: Ensures that production processes run efficiently and that products are available when needed. Disadvantage: Requires coordination across various teams and divisions.
Distribution PlanningThis involves planning and controlling the movement of goods from the production site to the customers.Advantage: Ensures timely delivery of products to customers. Disadvantage: Requires a reliable and efficient distribution network.

This article explains the three main approaches to balancing supply and demand in a supply chain plan. These approaches are stocking production on order, engineering made-to-order, and build-to-order. Each approach has its advantages and disadvantages and should be carefully considered when deciding which approach is best for a particular supply chain. Balancing supply and demand is essential to any supply chain plan and should be carefully considered.

  • Introduction

  • What is Balancing Supply and Demand?

  • Stocking Production on Order

  • Engineer Made to Order

  • Conclusion

Introduction: Balancing supply and demand is a fundamental question at the heart of every supply chain plan. It is essential to ensure that the correct goods are available to meet customer demand. This article will explore the three main approaches to balancing supply and demand, including stocking production on order, engineering made-to-order, and build-to-order.

What is Balancing Supply and Demand?

Balancing supply and demand ensures that the right amount of goods is available to meet customer demand. This process is critical to ensuring that customers are satisfied and that the supply chain runs efficiently.

Stocking Production on Order

The make-to-stock approach is based on forecasting how much customers will buy. This forecast drives all production and distribution planning. Before customers place an order, the work is done, and the products are ready to ship. This approach is sometimes called a push system, as products are pushed to customers even if they haven't ordered yet.

Engineer Made to Order

The build-to-order approach is based on having all production and distribution services on standby, waiting for the order to arrive. For this, production is done until the order is received. This approach is an example of a pull system, as an order needs to pull products through the supply chain.

Conclusion: Balancing supply and demand is critical to any supply chain plan. There are three main approaches to balancing supply and demand: stocking production on order, engineering made-to-order, and build-to-order. Each approach has its advantages and disadvantages and should be carefully considered when deciding which approach is best for a particular supply chain.

Successful supply chain management is the art of balancing supply and demand to ensure maximum efficiency.

IIENSTITU

This article delves into the essential aspect of balancing supply and demand in supply chain management, a topic vital to supply chain management classes, revealing three main approaches: stocking production on order, engineering made-to-order, and build-to-order, with each having its own strengths and weaknesses. Aimed at enabling maximum efficiency and customer satisfaction, these approaches represent the core of sound supply chain planning. Therefore, understanding and choosing the appropriate strategy based on individual supply chain characteristics are of paramount importance presented in

Stocking Production on Order, This approach is based on forecasting how much customers will buy, driving all production and distribution planning Products are made ready to ship before customers place an order, Advantage: Ensures goods are readily available for customers, reducing wait time Disadvantage: Risks of overproduction and holding excess stock, Engineer Made to Order, This approach involves having all production and distribution services on standby, waiting for the order to arrive Production doesn’t commence until the order is received, Advantage: Minimizes the risk of overproduction and holding excess inventory Disadvantage: May lead to longer wait times for customers, Build-to-Order, This is a variant of the made-to-order approach where the product is customized based on the customer's specifications, Advantage: Allows for high customization for customers Disadvantage: Requires a responsive supply chain, can be costlier and time-consuming, Balancing Supply and Demand, This is the overall goal of every supply chain management strategy which involves ensuring that there's an alignment of your supply with customer demand, Advantage: Leads to efficiency and customer satisfaction Disadvantage: Achieving this balance, requires accurate forecasting and flexible supply chain operations, Supply Chain Efficiency, This involves minimizing costs and time in the supply chain while maximizing the service level delivered to customers, Advantage: Increases profitability and customer satisfaction Disadvantage: Requires continuous monitoring and optimizing supply chain operations, Customer Satisfaction, This focuses on meeting or exceeding customer expectations in terms of product availability, delivery times, and after-sales service, Advantage: Leads to repeat business and building a loyal customer base Disadvantage: Requires a responsive and efficient supply chain, Forecasting, This involves predicting future demand for products based on historical sales data, market trends, and other factors, Advantage: Helps in planning production and inventory management Disadvantage: Uncertainties and inaccuracies in forecasting can lead to overproduction or stockouts, Inventory Management, This involves keeping track of stock levels and ensuring that the right quantity of products is available at the right time to meet customer demand, Advantage: Prevents stockouts and overstocks Disadvantage: Requires accurate forecasting and efficient inventory management practices, Production Planning, This involves planning and controlling all the processes involved in producing goods, from raw materials to the finished products, Advantage: Ensures that production processes run efficiently and that products are available when needed Disadvantage: Requires coordination across various teams and divisions, Distribution Planning, This involves planning and controlling the movement of goods from the production site to the customers, Advantage: Ensures timely delivery of products to customers Disadvantage: Requires a reliable and efficient distribution network
Balancing supply and demand stocking production on order engineer made to order build to order make-to-stock approach push system build-to-order approach pull system supply chain plan
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Amara Weiss
Institute Secretary, Author

I am Amara Weiss and for many years I have worked in the field of education, specifically in the area of technology. I firmly believe that technology is a powerful tool that can help educators achieve their goals and improve student outcomes. That is why I currently work with IIENSTITU, an organization that supports more than 2 million students worldwide. In my role, I strive to contribute to its global growth and help educators make the most of available technologies.

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