Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

4.4.5b Relationship between the Frequency of Customer Demand and the Frequency of Order Repetition 

Continuation from previous subsection (4.4.5)

It is also interesting to compare the feature frequency of customer demand in Figure (features related to customer and product or product family) with the feature frequency of order repetition as shown in Figure It is noteworthy that the values of the features in the same columns do not necessarily have to correspond.

Fig.        The features frequency of customer demand and frequency of order repetition do not necessarily need to correspond.

Indeed, procurement and production can be decoupled from demand via storage:

  • To a certain degree, storage can provide a buffer for discontinuous demand, so that there can be more frequent production. For example, a product can be manufactured throughout the year that will be in demand mainly at a holiday time like Christmas. Through this, capacities can be utilized more evenly. On the negative side, carrying costs are incurred.
  • On the other hand, if demand is continuous, delivery can also be made from storage, and usage can be replenished through less frequent orders in large batches. This course of action is sometimes unavoidable, due to both technical constraints (if, for example, such as in the process industry, certain production facilities allow production in specific batch sizes only) and economic reasons (if, for example, as is typical in procurement, the ordering of a small quantity makes no sense, because transport costs — or in production, setup costs — are too high in relation to the unit costs of the small quantity).

However, the more storage should be avoided, the more there has to be a connection between values of the features in the same columns: Unique demand occurs together with production or procurement without order repetition, discontinuous demand together with production or procurement with infrequent repetition, and continuous demand with production or procurement with frequent order repetition.

Similarly, the choice of the planning & control concept (see Section 4.5.3) as well as methods and techniques for materials management (see Section 5.3.2) must first be made on the basis of the frequency of customer demand. If a number of concepts and techniques are possible, the choice is determined by the selected frequency of production or procurement order repetition.

Course section 4.4: Subsections and their intended learning outcomes