the impact of demand variability business

The consumer market topographic point is going progressively volatile, dynamic and disconnected. Peoples tend to demand different degrees of measures within different clip periods to carry through their demands and wants. Due to this high demand variableness, companies face many troubles when transporting out their demand prediction processes to place future demand. Therefore, these alterations in market place ask for a procedure of dynamically measuring and pull offing demand. Shriveling merchandise life rhythms and volatile market topographic point are aggressively increasing the costs of demand direction mistakes.

Fighting and get bying with uneven demand is one of the toughest challenges faced by the cement makers. Most cement related organisations experience cyclical ( hebdomadal, monthly, etc. ) fluctuations in the degree of demand and if non addressed decently, it will ensue in either decrease in client service degree ( when demand is high ) or in underutilized resources ( when demand is low ) . Extenuating the above mentioned effects requires that the organisation adjust its capacity with the fluctuations in demand ( capacity direction ) , or alter the demand form to better fit the available capacity ( demand direction ) , or utilize these two schemes in combination.

Presently cement industry is confronting a higher degree of demand variableness as the consumer demands are really hard to foretell with the current economic context of Sri Lanka. As the Numberss of building undertakings are increasing, it is hard to foretell when clients will inquire for monolithic volumes of cement from cement fabrication organisations. Even within the retail section besides client purchasing forms are unpredictable. Due to this higher degree of variableness in demand degrees, it will impact how fabrication companies design and pull off their supply ironss and besides it affects the degree of relationship between retail merchants and providers. Due to this unpredictable demand forms, retail merchants and maker ‘s reduced the degree of finished goods stock list clasp within their premises.

Due to the stock list degrees being streamlined within the fabrication organisation, it will hold a greater impact upon the full fabrication supply concatenation within cement industry.In order to cut down dearly-won extra stock list, cement fabrication companies store cement within silos harmonizing to the forecasted demand degrees and the cement will be packed in to a bag when an order from a client received by the maker. In bend cement makers and their providers have to bear rapid alterations in demand while keeping a less stock list of natural stuffs and constituents.

In the yesteryear, when the consumers were more predictable, the companies produced merchandise and pushed it downstream near to the client. With inexpensive fuel costs, it did n’t count if stock list was in the incorrect location. Now with cargo costs so high and consumer behaviour so unpredictable, the fabrication organisations have begun to keep merchandise upriver every bit long as possible. Due to the higher degree of demand variableness for merchandises, it will ensue in an addition in the supply concatenation costs and activities of an organisation.

Cement makers in Sri Lanka are runing in an oligopolistic market where, merely few figure of cement makers are established in the industry. These few participants have a good market portion within the cement industry of Sri-Lanka ( Chiefly 07 big participants within Sri Lankan market including Holcim ( Lanka ) Limited ) .

Due to a little figure of rivals, the degree of competition among each other is really important, each and everyone attempts to capture a higher degree of market portion and seek to be the market leader in the Sri Lankan cement market. Sometimes, many of the big participants negotiate with each other and fix monetary value bound for the merchandises which they offer. This is besides defined as monetary value trusts. This pattern is usually carried out by the oil bring forthing companies, as they have a good market portion globally, every bit good as no 1 has still found an alternate energy beginning, which is effectual and efficient as oil. Due to this ground those companies dominate in the planetary concern universe.

These monetary value repair patterns put a immense load upon consumers as they will non be able to happen an alternate merchandise within the short tally every bit good as in the long tally. But in the context of cement industry, there is no such pattern in Sri Lanka and the full cement providers are seeking their best to supply their merchandises at a competitory monetary value towards their terminal clients. Government of Sri Lanka has intervened in the cement market as a regulator, in order to cut down unjust market patterns carried out by cement fabrication companies and they have established a monetary value ceiling of maximal retail monetary value of Rs.940/= for a 50 Kg bag of cement.

In order to cut down the higher degree of demand variableness faced by an organisation, the direction of an organisation should implement proper demand management/demand smoothing patterns within the organisation, in order to cut down the degree of supply concatenation costs of the organisation every bit good as the degree of supply concatenation activities of an organisation. These demand direction patterns are more applicable up on organisations which are in to fabrication procedures.

Demand direction is a broader construct and it tries to capture a more complete position of the concern operations of an organisation. Demand direction is non merely calculating. Demand direction is all about pull offing all the activities associated with detecting markets, be aftering merchandises or services for those markets and so carry throughing the clients demand. It is anintegrative set of procedures across, where non merely the endeavor, but the trade spouse webs besides need to be monitored.

A good demand direction procedure can enable a company to be more proactive to awaited demand, and more reactive to unforeseen demand.

In other words we can explicate demand direction as the procedure of altering the demand patterns to fit the available capacity of the organisation.

Aim of the Research

“ Finding out the impact of Demand variableness up on Supply Chain costs/activities of HLL and alining demand for merchandises with the available resources to guarantee client demands are met and their satisfaction is maximized. ” ( Pull offing demand with the available capacity degrees )

This peculiar undertaking was carried out in-order to look into whether there is any relationship between demand variableness and supply concatenation activities/costs of HLL. Harmonizing to the findings, methodological analysiss have been introduced to smooth the demand degrees ( demand determining ) of the Holcim Lanka, in-order to supply an efficient and effectual client attention and service to the terminal clients. It includes a brief reappraisal on the bing degree of demand variableness with in HLL and how it affects the supply concatenation costs and activities of HLL. Finally, has suggested ways in which demand can be smoothen or cut down the degree of variableness in demand, in order to confront the higher degree of demand variableness in future.

There is a smooth demand form within the cement industry and there are no such high extremums or diminutions can be seen when we analyze industry related demand informations. But when analysing the company data, there is a higher degree of volatility within the company gross revenues informations. It means that the demand for cement has been manipulated by the mediators in a manner, which is supportive for them. Mediators have created a form on their ain and it affects the smooth operations of the fabrication workss of HLL within the short tally every bit good as in the long tally.

As the demand variableness of HLL is excessively high, company is confronting many troubles and has to carry on many dearly-won operations to fulfill their ultimate client demands. When the demand variableness is really high, the company has to confront many troubles such as, clients waiting until the concluding merchandise being loaded to their trucks, addition in pay costs due to the payment of overtime charges to the workers, addition in transit cost, loss of market portion, stock out state of affairss in the market, keeping a higher degree of safety stock, supply concatenation planning disagreements and etc.

Therefore, in-order to cut down the unwanted costs incurred by HLL within their supply concatenation, due to big fluctuations in demand degrees and in order to be after the supply concatenation processes in a cost effectual mode, a demand smoothing process demand to be implemented within the organisation. It means that this undertaking gives more precedence upon placing the relationship between demand variableness and supply concatenation costs/activities of HLL and eventually it suggest demand smoothing ( sensing/shaping ) methodological analysiss need to be introduced within HLL to derive more benefits in close hereafter.

Profile of the Company

Holcim ( Lanka ) Limited is the lone company who engaged in the cement fabrication procedure in Sri Lanka and besides they import cement when the demand degrees from clients are excessively high. But their chief concern is to fabricate cement within Sri Lanka every bit much as possible as they have adequate resources within the state and to aware all the Sri Lankans that the cement is a concluding merchandise which manufactured within Sri Lanka, in-order to make a trade name image of made in Sri Lanka. Holcim Lanka is a portion of the planetary Holcim group. Bing the market leader in the cement industry, the company focuses on economic, societal and environmental public presentation along the ternary bottom line of sustainable development.

Holcim ( Lanka ) Limited is runing in an oligopolistic market where, merely few figure of cement makers are established in the industry. These few participants have a good market portion within the cement industry of Sri-Lanka ( Chiefly 07 big participants within Sri Lankan market including HLL ) .

The company presently operates one to the full incorporate cement works in Puttalam, while besides runing a grinding works in Galle ( 425,000MT ) . The Puttalam works has a cinder fabrication capacity of 530,000MT and a cement crunching capacity of 975,000MT. Limestone sedimentation is obtained from Aruwakkalu prey which is located 41 kilometers off from the works.

Holcim Lanka presently has 04 chief fixed warehouses in different parts of the state and they are located in Colombo, Kurunagala, Jaffna and in Trincomalee. These warehouses are chiefly lending to fulfill the demand of end client in an effectual mode ( without any holds ) and to demo the presence of the company cement and market coverage about different parts of Sri Lanka. All the merchandises of HLL will be distributed to the several traders via a complex distribution web dwelling of chief distributers, sub distributers and direct traders.

The Holcim cement scope meets client demands with the application based sub-brands such as, Supiri ( concrete applications ) , Pedereru ( masonry applications ) , Ambuja ( concrete merchandise applications ) , Readyflow and Extra for substructure and undertaking applications. Holcim Lanka besides manufactures particular cements for big scale substructure undertakings. In add-on Holcim Lanka provides a host of proficient services as building solutions to its clients. The company operates in all parts of Sri Lanka selling cement and providing services, making about 15,000 ( direct and indirect ) employment chances.

Holcim Lanka has defined two methods to distribute/sell the concluding results of their fabrication procedures. ( i.e. – Cement ) They are,

Pick-up – this is where the client comes in to the fabrication works straight off and picking up the cement from the packing terminus. Within this definition it besides captures the clients who pick up cement bags from the warehouses of Holcim Lanka.

Delivered – this is where the Holcim Lanka Company delivers the cement straight to the terminal clients place. This operation can be seen chiefly in majority operation. Transportation system of cement is carried out by a 3rd party contractor.

Holcim Lanka experiences a low demand state of affairs within the period of 2008 to 2009, due to the war epoch of the state. Currently Holcim Lanka is confronting a market state of affairs called high demand state of affairs ( sold out market ) , where clients are inquiring for more and more cement, but the company does n’t hold adequate production capacity to provide that degree of demand. It means that the demand and supply of cement is non duplicate and there is a scarceness of cement handiness within the market. This will be a great chance for our rivals as they can set up a good market for their merchandises. Therefore, in-order to avoid market portion losingss, net income losingss, client losingss and etc. the organisation should develop a program to despatch their merchandises to all the clients in an effectual mode, by safeguarding the bing degrees of market portion of the company. From mid of 2010 onwards, Holcim Lanka is confronting a high demand state of affairs ( sold out market ) .

Company besides divides their current and possible market in to two classs. They are,

Retail Market – End client ( little graduated table cement users ) or intermediates ( hardware proprietor, distributer ) in the supply concatenation of cement are included in this class

Industrial Market ( B2B market ) – End clients who will be utilizing cement in a big graduated table mode, ( i.e. – for undertakings ) and industries who are involved in fabricating cement related merchandises, such as asbestos sheets, asphalt and etc.

Significance of the research at Holcim Lanka Limited

Demand direction is non expected to cut down the range or criterion of merchandises ( cement ) to countervail direction lacks elsewhere in the company. It aligns demand for merchandises with the available resources to guarantee echt demands are met and client satisfaction is maximized.

Successful demand direction requires the organisation to clearly understand that their corporate function is non to supply larger figure of merchandises ( cement ) , but to supply:

Effective merchandise results to run into identified client demands

Assess if the client demands are altering and

To react suitably and within the available resources.

This requires that the organisation should develop a close working relationship with their clients based on thorough cognition of their features, demands and outlooks.

An of import constituent of demand direction is happening ways to cut down demand variableness and better operational flexibleness. Reducing demand variableness AIDSs in consistent planning and reduces costs. Increasing flexibleness helps the house respond rapidly to internal and external events. Most client driven variableness is ineluctable, but one of the ends of demand direction is to extinguish direction patterns that increase variableness, and to present policies that surrogate smooth demand forms. Another cardinal portion of demand direction is developing and put to deathing eventuality programs when there are breaks to the operational programs of the company.

Most demand direction attempts may be characterized as demand smoothing as they chiefly aim to increase the demand during slow periods and cut down the demand during peak periods. The ground for this is clear: smoother demand lessens the demand for dearly-won accommodations in capacity. Therefore, Holcim ( Lanka ) Limited should seek their best to smooth their demand degrees by either seeking to act upon their clients to alter the mark accomplishing day of the months or by scheduling the reaching of clients towards the company premises in progress.

Demand direction can be used in both market state of affairss, which are defined as high demand ( sold out market ) state of affairs and low demand state of affairs. In a high demand state of affairs, clients are inquiring for more cement, but the organisation does n’t hold adequate capacity to provide that degree of demand. In a low demand state of affairs it is frailty versa, that is clients are non demanding for more cement, but the company have adequate capacity to provide a higher degree of demand than the bing degree of demand.

In both these state of affairss, if the company does n’t take much required actions to pull off the degree of demand variableness, by smoothing the demand degrees or scheduling the distribution procedure and etc. , so Holcim Lanka will confront many consequences/circumstances in the short tally every bit good as in the long tally. Consequences can be classified as follows,

Short tally

  • Loss of gross revenues and it reduces the net income degrees of the company
  • Higher degrees of ailments from clients ( Unsatisfied clients )
  • Higher degree of congestion within the fabrication workss
  • Addition in safety stock care cost
  • No proper smooth terminal running ( ad-hoc running )
  • Opportunity cost of non running the crunching units in an effectual mode
  • Higher degree of overtime ( O/T ) payments will necessitate to be paid to workers
  • Addition in the figure of managing amendss due to the higher degree of work burden

Long tally

  • Loss of market portion to rivals
  • Loss of higher degree of net incomes
  • Lower degree client keeping within the organisation
  • Discrepancies in supply concatenation planning procedures
  • Large amount of money stuck in the stocks
  • Addition in the staff turnover due to the higher degree of work burden ( unsated employees )

Unnecessary machinery running cost and importing of natural materials/cement will necessitate to be carried out

In-order to avoid above fortunes, Holcim Lanka should implement an effectual demand direction system within their organisation. The degrees of demand of the organisation play an of import function in the supply concatenation planning procedure. Because the degree of demand is the key input which program out the whole procedure of supply concatenation and hence, pull offing it in an effectual mode will make many benefits towards the organisation every bit good as towards their stakeholders as good.

When the degree of demand is low or high, based on the state of affairs, supply concatenation contrivers should develop programs to smooth the twenty-four hours to twenty-four hours operations of the organisation. If there are any disagreements in the supply concatenation planning procedure due to the demand variableness, so it will hold a higher degree of fiscal every bit good as non fiscal impact upon the organisation.

Now you can understand the significance of demand direction for an organisation. The impact which demand variableness creates will differ from organisation to organisation based on their degree of operations. A fabricating organisation like Holcim Lanka will hold a greater impact upon its operations due to the demand variableness, as the organisation is be aftering out all their activities based on the demand degrees.

Therefore, when the demand degrees starts to alter, the smooth operations of the mill every bit good as the whole value concatenation of the organisation will acquire affected. In-order to avoid those fortunes, Holcim Lanka should be after and implement an effectual demand direction system within their organisation in the hereafter, in-order to last in the market without losing their valuable competences to the rivals.

Restrictions of the Research

Although this research was carefully prepared and has reached its purpose, there were some ineluctable restrictions and defects.

First, because of the clip bound and based on available informations, the analysis have been carried out using the historical gross revenues informations, up to past five old ages from 2007 to 2011 of Holcim Lanka Limited

Second, this peculiar undertaking merely observes the degree of demand variableness faced by Holcim Lanka Limitedand it propose methods/techniques which need to be put into operation within the organisation to smoothen/overcome the high demand variableness degrees in hereafter. If there were more clip being offered to transport out the research, so this research would hold extended towards the cement industry of Sri Lanka as a whole.

Third, demand pattern/trend designation and detecting correlativity between variables have been carried out based on the secondary informations collected from the ERP system of Holcim Lanka Limited. The degree of truth and unity of informations is non high as primary informations and informations had to be modified in-order to provide the demands of the undertaking.

Fourth, Due to the deficiency of dependable informations, the analysis has been carried out merely upon Holcim Lanka Limited. There were some good beginnings of information from this peculiar company and hence the range of the analysis have been reducedand decided to transport out research merely upon Holcim Lanka Limited.

Fifth, the findings of the survey were based on the premise that information provided by the respondents is right. Some of findings are well based on the information given by the respondents. The bias attitude of the respondent can be a restriction. The study is limited to 50 respondents from employees within supply concatenation of HLL and 50 respondents from clients of HLL, which is really little compared to the population. Hence, this sample size may non be genuinely representative. Due to their busy agenda, many respondents did non collaborate.

Finally, there were really limited Numberss of articles available upon the research subject. Due to this scarceness of resources it was really hard to put a good foundation to understand the research job, which has been chosen as the research subject. Because of this ground, new theoretical account have been developed to place whether demand variableness have a important impact upon the addition in supply concatenation costs of Holcim Lanka Limited.

Definitions of Key Terminology

Demand Variability – Scope of values for demand ( measure demanded ) , which is variable based on attempt in selling or publicities, seasonality, vacations, particular events and other extrinsic factors.

Supply Chain – It is a system of organisations, people, engineering, activities, information and resources involved in traveling a merchandise or service from provider to client

Supply Chain Relationship Management – Management of relationships with supply concatenation spouses to fit public presentation with measurings and wagess so that all companies in the supply concatenation are reasonably rewarded for overall supply success

Independent Demand – The sum of merchandise demanded ( by clip and location ) by the end-use client of the supply concatenation

Derived Demand – Demand that is derived from what other companies in the supply concatenation do to run into their demand from their immediate client ( i.e. , the company that orders from them ) .

Dependent Demand – Demand for the constituent parts that go into a merchandise.

Oligopolistic Market – It is a market signifier in which a market or industry is dominated by a little figure of Sellerss. Lack of competition can take to higher costs for consumers.

Regulator – An bureau established by cardinal authorities for the control of or intercession in the operation of markets

Cartel – It is a formal understanding among viing houses. Cartel members agree on monetary value repair, entire industry end product, market portions, allotment of clients, allotment of districts, division of net incomes and etc.

Anticipated Demand – Expected/forecasted degree of demand for a merchandise

Unanticipated Demand – Unexpected/sudden rise in the degree of demand for a merchandise

Proactive – Creating or commanding a state of affairs by doing something to go on instead than reacting to it after

Reactive – Acting in response to a state of affairs instead than making or commanding it

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