Configuration and evaluation of an integrated demand management process using a space-filling design and Kriging metamodeling

M Ben Ali,S D’Amours,J Gaudreault,M-A Carle

doi:10.1016/j.orp.2018.01.002

M Ben Ali, S D’Amours + Show 2 more

Open Access

https://doi.org/10.1016/j.orp.2018.01.002

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Abstract

ObjectiveThis research aims to develop a basic understanding of a demand management process integrating sales and operations planning (S&OP) and order promising in a Make-To-Stock environment and to compare different demand management policies with limited capacity. ContributionTypical researches about demand management processes analyze few system specifications or vary few potential factors one at a time. Yet, additional insights can be obtained by employing a space-filling design and Kriging metamodeling for analysis. MethodologyWe compare two configurations of the integrated demand management process. While the First-Come First-Served concept is used at the order promising level for the first configuration, the second configuration uses nested booking limits and gives advantage to profitable customers and attractive periods. Considering various order arrival sequences, we generate Kriging metamodels that best describe the nonlinear relationships between four environmental factors (demand intensity, demand forecast error, customer heterogeneity and coefficient of variation) and three performance measures (yearly profit margin, yearly sales and high-priority fill rate) for Canadian softwood lumber firms. Since our simulation experiments are time-consuming, we employ a Latin hypercube design to efficiently take into account different market situations. ResultsOur analysis reveals the potential to improve the performance of the demand management process if we know high-priority customers needs before fulfilling low-priority orders and if we use nested booking limits concept.

Highlights

IntroductionThe Canadian softwood lumber industry is struggling to cope with certain challenges
Gaps between First-Come First-Served approach (FCFS) and nested booking limits (NBL) approaches are statistically significant regarding yearly profit margin (YPM) and HP fill rate (HPFR) since the confidence intervals do not overlap when we pass from blue side to red side in Fig. 6(a) and (c) respectively
Our analysis demonstrates that in a supply-constrained environment such as the Canadian softwood lumber industry, managers can achieve better performances by integrating sales and operations planning (S&OP) and revenue management (RM): The integrated demand management process (IDMP) makes an implicit trade-off between the objectives of the production team and the incentives of sales team

Summary

Introduction

The Canadian softwood lumber industry is struggling to cope with certain challenges. Canadian softwood lumber companies have employed costcutting strategies to maintain competitiveness and profit margins [2]. They must be able to remain profitable in situations where markets experience disturbances. This requires a deepened understanding of the market side of the supply chain to take advantage of sales opportunities [3], and an improvement of existing processes by using real-time monitoring systems as well as integrated planning systems [4]

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