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Forecasting is essentially a reactive approach that considers fluctuations in demand to be mostly outside the firm’s control.

Rather than simply forecasting and reacting to changes in demand, however, business executives would prefer to influence the

timing, pattern, and certainty of demand to whatever extent they can. They do this through demand management activities that

adjust product characteristics including price, promotion, and availability. The purpose is to influence product demand to achieve

sales objectives and to accommodate the supply chain resources and capacities that a firm has in place.

How would you require extra resources to expand and contract capacity to meet varying demand for your current

organization?

How does backlogging smooth out certain orders to demand fluctuations?
When does customer dissatisfaction create an inability to meet all demands?
How would you buffer a system through the use of safety stocks (excess inventories), safety lead time (lead times with

a cushion) or safety capacity (excess resources) at work?

Here's a breakdown of the concepts and how they relate to demand management:

1. Expanding and Contracting Capacity to Meet Varying Demand

Identifying Needs: First, you need to understand the nature of demand fluctuations. Are they seasonal, cyclical, or unpredictable?
Resource Types: Consider the types of resources needed:
- Labor: Hiring and firing employees (potentially part-time or temporary staff), training, and upskilling.
- Equipment: Purchasing, leasing, or sharing equipment depending on the fluctuation's duration.
- Space: Expanding or contracting physical facilities, possibly through warehousing or temporary space rental.
Flexibility: The ability to quickly adjust capacity is crucial. Flexible staffing models, scalable technology, and modular facilities can be beneficial.