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Balancing the Supply and Demand PDF

   

Added on  2020-10-02

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1Running head: BALANCING THE SUPPLY AND DEMAND Balancing the supply and demandNameInstitution

2BALANCING THE SUPPLY AND DEMAND Balancing the supply and demandIntroduction Optimal and consistent balancing of supply demand is a big challenge for companies regardless of their sizes. The art of aligning supply and demand is quite important in commerce and for many years the process has been labelled with different names such as Sales, Inventory and Operations Planning (SIOP), Sales and Operations Planning (S&OP) and Integrated Business Planning (IBP). Alignment of supply and demand is one important business aspect that has been extensively researched but still many organizations struggle to practically achieve optimal inventory. The lack of balance has led to loss of sales in one hand and increased cost of keeping inventory on the other hand. Because of the challenge to obtaining of optimal inventory, many organizations vie over or understocking as a binary choice that must be made with little regard that balancing of demand and supply can be a solution to the challenge. The challenge of aligning demand and supply extends to manufacturers also as it becomes hard to determine how much to make, what to make and when is it supposed to be made. Failure to meet the aforementioned challenge, compels companies to suffer numerous consequences. The paper will discuss some of the strategies used for balancing demand and supply including sales and Operations Planning, understanding of demand by consumers, Investing in supply/demand planners, integration of Pareto analysis in stock targeting, forecasting supply, order optimization and replenishment among others. From a manufacturing perspective, the entire production process is affected when the demand and supply is not effectively balanced. The company may not have the right raw materials that are necessary for meeting production needs. The cost of production may increase anytime the company undertakes an unscheduled changeovers so as to meet unplanned increase

3BALANCING THE SUPPLY AND DEMAND in demand due to effective promotional activities (Moon, 2018). On the other hand the company may be forced to have excessive inventory for slow moving goods which is costly. Moreover, promotional programs may be inhibited by shortage of promoted and new products which affectsthe sales. Additionally, a company may experience stockouts due to failure of having the right product demanded in the market at the right place within the specified time (Moon, 2018). Frequent stockouts for the company are not good for business because they lead to customer loss or costs that result from expedited orders. Sales and operations planning (S&OP) S&OP is a business process used by companies to align supply with demand. The processis usually used by manufacturing companies where they set their output level at an optimum point so as to meet the current and planned level of sales in the market (Supply Chain market, 2020). While applying S&OP, the company must ensure that it meets the set objectives of productivity, profitability, optimal inventory levels, competitive customer lead times among others. Organizations can manage their businesses proactively through S&OP to achieve optimal production, inventory and customer service. S&OP process The process is usually rigorous and involves numerous activities and stages all aimed at ensuring optimal operations. The company needs to assemble representatives from key functional areas that encompasses top management, finance, manufacturing, sales and marketing and engineering and design (Supply Chain market, 2020). The group’s goal is to come up with an agreement on what the current status of the product is and future plans of how demand will bemet. The process involves numerous stages. The first stage is meeting preparation where

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