What is Demand Management?
Summary
TLDRThe transcript discusses demand management in the context of a pizza takeaway shop, explaining how market demand and individual orders affect operations. It highlights the importance of forecasting and managing demand to improve efficiency, particularly during peak times. Strategies like offering discounts during quiet periods, pre-ordering systems, and spreading out large orders can help smooth demand. The key takeaway is that demand can be influenced, and proactive management is crucial for enhancing operational performance, balancing demand peaks, and reducing strain on resources.
Takeaways
- 🍕 Demand refers to both market demand and specific orders from operations.
- 📊 Market demand for takeaway pizzas in New York can be as high as 1 million pizzas per day, mostly during the evenings.
- 🏪 A particular pizza shop’s demand is driven by individual customer orders, which can be stable over time but unpredictable in the short term.
- ⏱️ Forecasting demand can be done on an hourly basis, with peak times like lunch and evenings seeing higher orders per hour.
- 🔄 Demand management is crucial for operations, focusing on customer orders rather than overall market demand.
- 🎯 Operations managers should proactively manage demand instead of reacting to customer surges.
- 📈 Demand management is closely linked to forecasting and capacity planning, both in the short and long term.
- 💡 Smoothing demand throughout the day, such as offering discounts during off-peak hours, can reduce operational strain.
- 📦 Pre-order systems can help manage large orders, distributing them over time to avoid overloading production.
- ⚙️ Effective demand management can significantly improve operational efficiency by influencing demand timing, quantity, and uncertainty.
Q & A
What is the difference between market demand and a specific shop's demand?
-Market demand refers to the total number of pizzas wanted by consumers, such as one million pizzas per day in New York, while a specific shop's demand is the number of customer orders that come directly to that pizza shop.
How can demand for a particular pizza shop vary throughout the day?
-Demand can be predictable on an hourly basis. For example, a pizza takeaway shop might expect 10 pizzas per hour during the day, 50 per hour at lunchtime, and 70 per hour from 6 pm to midnight.
What is demand management, and why is it important for operations?
-Demand management involves taking proactive steps to influence the quantity, timing, and uncertainty of customer orders. It is important because it helps businesses improve their operational performance and handle irregular demand.
How does forecasting demand relate to pizza shop operations?
-Forecasting helps predict both short-term and long-term demand, such as expected orders per hour on a Saturday night or total pizzas per month. Accurate forecasts enable better capacity planning.
What challenges arise when a pizza shop faces high demand peaks?
-High demand peaks can overwhelm a shop's production capacity, leading to delays or customers leaving. For instance, if 100 people order pizzas but the shop can only make 50 per hour, it cannot meet demand without making adjustments.
What strategies can a pizza shop use to manage demand peaks?
-A shop can offer discounts during quiet periods to spread demand or implement a pre-order system. Another strategy could involve delivering a large order in smaller batches over time, such as delivering 33 pizzas per hour instead of all 100 at once.
Why might some operations managers find the idea of demand management strange?
-Some might view demand as something fixed—customers walk in and place orders, and businesses must react. However, proactive managers see opportunities to influence and manage demand to improve operations.
How can smoothing demand help a pizza shop operate more efficiently?
-By smoothing demand, such as encouraging more orders during quiet periods, a pizza shop can avoid overwhelming peaks that stress production capacity. This leads to a more manageable and efficient workflow.
What role does capacity management play in handling demand?
-Capacity management ensures that the pizza shop can meet demand without overwhelming its resources. It involves planning for expected peaks and finding ways to handle irregular demand effectively.
What are the two key takeaways about demand management?
-First, there are many ways to influence the quantity, timing, and uncertainty of demand. Second, actively managing demand can significantly improve operational performance by making processes more manageable.
Outlines
🍕 Understanding Market and Operational Demand
This paragraph explains the concept of demand, distinguishing between market-wide demand and specific operational demand. It uses the example of a pizza takeaway in New York, where overall demand may reach a million pizzas per day. For an individual pizza shop, demand consists of unpredictable customer orders that can vary by the hour. Understanding this difference is crucial for business operations.
⏰ Hourly Breakdown of Demand for a Pizza Shop
Here, the focus shifts to how demand fluctuates throughout the day for a pizza takeaway shop. For instance, during lunch hours, demand can spike to 50 pizzas per hour, with an even higher peak of 70 pizzas per hour during the evening. This illustrates the importance of monitoring demand on an hourly basis to manage operations effectively.
📊 Managing Demand vs. Responding to Orders
This paragraph contrasts overall market demand with the actual orders received by individual businesses. While overall demand is a factor, it’s the specific orders that matter to operational staff. The challenge lies in balancing customer orders and production capacity, which proactive operations managers can address through better planning.
🎯 Proactive Demand Management: Not Just Responding
Here, the text emphasizes the concept of demand management and its relevance to operational efficiency. Rather than simply reacting to incoming orders, proactive managers forecast and manage demand to avoid overwhelming their capacity, especially during peak hours. Managing demand can smooth operations and improve service delivery.
🛠 Strategies to Manage Irregular Demand
The paragraph offers practical strategies for dealing with fluctuating demand. By offering discounts during quiet periods and introducing pre-order booking systems, businesses can balance their workload. For instance, instead of delivering 100 pizzas at once, a pizza shop can schedule smaller deliveries over a longer period.
💡 Key Takeaways of Demand Management
The final paragraph presents two key takeaways: first, businesses can influence the quantity, timing, and uncertainty of demand; and second, managing demand is crucial for improving operational performance. Smoothing demand makes operations more efficient and reduces the strain on resources.
Mindmap
Keywords
💡Demand
💡Market demand
💡Operations
💡Forecasting
💡Capacity management
💡Demand management
💡Peaks and troughs
💡Pre-order system
💡Discounts
💡Operational performance
Highlights
Market demand for takeaway pizzas in New York can reach up to one million pizzas per day, primarily in the evenings.
Individual shop demand is based on specific customer orders, which can be stable on a weekly or monthly basis.
Demand within a day can vary significantly, with peaks such as 50 pizzas per hour during lunchtime and 70 pizzas per hour from 6 PM to midnight.
Operations managers focus on the demand that directly impacts their specific business operations, not the overall market demand.
Demand management involves forecasting and capacity management, which is important in both long and short-term contexts.
Handling irregular and uneven demand is challenging and expensive for business operations like pizza takeaways.
Smoothing demand throughout the day can help reduce pressure on operations during peak times.
Offering discounts during typically quiet times, like the daytime, can help smooth out demand.
Pre-order booking systems can help spread large orders across several hours rather than handling everything at once.
For example, a large house party ordering 100 pizzas could be managed more efficiently by delivering 33 pizzas per hour for three hours.
Demand management helps influence not only the quantity and timing of demand but also how uncertain it is.
Proactive steps in demand management can significantly improve operational performance.
Production capacity limits, such as only being able to produce 50 pizzas per hour, can cause delays if demand exceeds supply.
Irregular demand can be smoothed through strategic initiatives like discounts and pre-order systems.
Demand management is vital for improving the overall efficiency and success of business operations.
Transcripts
when we talk about demand we are
referring to both what the market wants
and what is specifically ordered from
our operations
there is a whole market demand for
takeaway pizzas in New York maybe one
million pizzas per day mostly in the
evenings
but if you are a particular pizza shop
your demand is made up of the customer
orders the overall takeaway shops demand
for a particular shop might be quite
stable and predictable on a weekly or
monthly basis but it is made up of
individual orders which typically arrive
with no Advance warning
if forecasting demand through an
individual day we might consider looking
at it on an hourly basis for example
typically demand for the pizza takeaway
shop could be 10 pizzas per hour during
the day 50 per hour over lunch time and
70 per hour from 6 pm to midnight
talking more generally again the overall
market demand is clearly a key factor in
your own businesses demand but it is the
orders that come to your own
organization's operations that us people
working in operations really care about
the idea of demand management might seem
strange to many I mean the demand is
just what there is customers turn up and
order stuff what can we do about that
if a hundred people walk in the front
door of the pizza takeaway we can't
change that and we only have the
production capacity to make 50 per hour
so the others will just have to wait or
go elsewhere
but that's not the attitude of a
proactive operations manager
the topic of demand management is deeply
related to forecasting and capacity
management both on the long term pizzas
per month and the short term say the
expected demand between 6 and 7 pm on
Saturday nights handling irregular and
uneven Demand on our business operations
is is very hard and expensive and the
same is true for our pizza takeaway
example
they might wisely seek to actively
manage demand and smooth demand
throughout the day reducing the very
challenging Mega Peaks and troughs
it could offer discounts for pizza
orders during the day which is normally
a quiet period and it could initiate a
pre-order booking system so some of the
big orders are less of a supplies
or instead of trying to make and deliver
100 pizzas at once which takes ages and
half of them are then cold instead it
could offer that big customer the
alternative to deliver 33 pizzas per
hour for three hours to their Mega house
party rather than all 100 at once
the two key takeaways of demand
management are a there's lots we can do
to influence demand quantity timing and
how uncertain it is and B that it really
matters to improve our operational
performance if we can make things easier
on ourselves by taking steps to manage
our demand
[Applause]
[Music]
[Applause]
[Music]
thank you
[Music]
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