MANAGING DEMAND UNCERTAINTY THROUGH ORDER OVERPLANNING

Most techniques for managing demand uncertainty require a certain degr ee of stability in the environment, since they are completely or parti ally based on the observation of historical data. When applied to a co ntext characterized by irregular and sporadic demand these techniques show poor performances. In fact, in such a case uncertainty management calls for the gathering of information that directly anticipates futu re requirements. Although contexts with irregular and sporadic demand have received only minor attention in the past, they are currently gai ning ever more importance and extending their occurrence. This paper i llustrates and discusses a method, called order overplanning, specific ally designed to cope with uncertainty in these environments. It consi sts of an articulate and coherent set of forecasting procedures, plann ing principles and slack control techniques. From a Master Production Scheduling (MPS) perspective, order overplanning is similar to hedging and option overplanning: gross requirements are larger than expected demand. The major difference is that order overplanning uses two disti nct units in the MPS and forecasting procedures: while the MPS unit is an end item or a module, the forecasting unit is a customer order. Th is makes order overplanning able to exploit early information generate d by each customer during its purchasing process, information that oth erwise would be lost. This marked advantage comes to the detriment of an increased effort of integration between Sales and Manufacturing, es pecially for controlling the slack created to handle uncertainty. The paper first infers the principles and procedures of order overplanning by analysing the case study of an Italian telecommunications manufact urer. Then, it discusses the main advantages and disadvantages of this method, in order to identify the main factors affecting its performan ces and to determine the planning environments where it fits coherentl y.