Demand Based Production

What is Demand Based Production?

Demand Based Production is a production strategy that focuses on moving inventory through the production process only when it is needed to fulfill customer requirements. This approach is also known as a "pull" system, as it pulls inventory through the production process based on actual demand.

In traditional production systems, inventory is often pushed through the production process based on forecasts or predetermined schedules. This can lead to overproduction, excess inventory, and inefficiencies. Demand Based Production, on the other hand, aims to eliminate these issues by aligning production with actual customer demand.

The key principle of Demand Based Production is that inventory is only moved to a work center when there is a specific customer requirement to be fulfilled. This means that production is driven by customer demand rather than by internal forecasts or assumptions. By producing only what is needed, companies can reduce waste, minimize inventory holding costs, and improve overall efficiency.

To implement Demand Based Production, companies need to establish effective communication channels with customers to understand their requirements accurately. This can be achieved through methods such as customer surveys, market research, or direct communication with customers. By gaining a clear understanding of customer demand, companies can adjust their production schedules accordingly.

Another essential aspect of Demand Based Production is the concept of just-in-time (JIT) manufacturing. JIT manufacturing aims to minimize inventory levels by producing goods at the exact time they are needed. This approach helps to reduce storage costs, minimize the risk of obsolescence, and improve cash flow.

Demand Based Production also relies on effective supply chain management. Suppliers play a crucial role in this production strategy as they need to deliver raw materials and components precisely when they are needed. Close collaboration with suppliers and the use of technologies such as electronic data interchange (EDI) can help ensure a smooth flow of materials and minimize disruptions.

Overall, Demand Based Production is a customer-centric approach that aims to align production with actual demand. By eliminating waste, reducing inventory levels, and improving efficiency, companies can enhance customer satisfaction, reduce costs, and gain a competitive advantage in the market.