Use Of Volume-Variance Demand Analysis In Planning Strategy Formulation

USe OF VOlUMeVAriAnCe DeMAnD AnAlySiS in PlAnning StrAtegy FOrMUlAtiOn By Alan l. Milliken Shows how to combine volume analysis with variance analysis to determine the contribution of a product to the company’s profit … product with a high variance because of seasonality and data trend is statistically predictable … collaboration with a customer helps to improve forecasts and reduce inventory. T T he downturn in the global economy has encouraged firms to take a closer look at their excess, slow- moving, and obsolete inventories and assess why these exist. Cash is King in this economic environment. Management’s bias toward lower inventory, even to the point of sacrificing service and cost, has resulted in much more pressure on supply chain to find and correct the causes of dysfunctional inventories. One means of better identifying the inventory risks associated with offering products on a make-to-stock, off-the-shelf basis is volume-variance demand analysis. WHAt iS VOlUMeVAriAnCe DeMAnD AnAlySiS? Of course Pareto’s Law has been used to identify the significant few for centuries. Supply chain has performed ABC volume analysis for decades. For example, ABC segmentation has ...