Academic journal article The Journal of Business Forecasting Methods & Systems

Evolution in the Demand and Supply Planning at Dow Corning

Academic journal article The Journal of Business Forecasting Methods & Systems

Evolution in the Demand and Supply Planning at Dow Corning

Article excerpt

Describes in detail the demand and supply planning process where the same product is offered to multiple industries ... the flexible supply chain is needed to keep the supply aligned with market demands ... use forecast metrics, not to punish the guilty, but to feed into the improvement process.

Dow Corning was established in 1943 as a joint venture between Corning Glass Works (now Corning, Incorporated) and The Dow Chemical Company, specifically to explore the potential of silicones. Dow Corning now operates 39 key manufacturing sites and warehouses, serving more than 25,000 customers worldwide, and offering more than 7,000 products and services. Dow Corning is a global leader in silicon-based technology and innovation.

Silicon-based products are all around us every day. Hyper-pure polycrystalline silicon is a fabricated raw material used in the semiconductor and photovoltaic industries as the base for computer chips and electronics. Delicate circuit boards in computers, DVD players and cellular phones are protected with silicon-based materials. Durable sealants, lubricants, protective coatings and greases keep automobiles running smoothly. Silicon-based adhesives and sealants improve both the look and the structural integrity of modern buildings. Silicon-based materials improve the feel of fabrics, provide water-proofing and enhance the performance of laundry detergents, fabric softeners and other household products. In nearly every industry, you will find silicon, a key product of Dow Corning, in one form or the other.

Dow Corning is a highly vertically-integrated company, with operations from silicon metal processing, to basic polymers, to fluids and emulsions, to specialty intermediates, all the way to thousands of finished products offered to a multitude of industries. The organization is structured to support the platform of innovation, growth and service, through more than 50 bills of material levels, which leaves numerous challenges at the forefront of the planning process!

Dow Coming's product lines are aligned to different Business Units, each of which has its own strategies and goals. However, these product lines often serve multiple industries, as similar technologies are leveraged to offer solutions to customers with similar application needs. As an example, a sealant product could be used in construction, automotive and electronics applications. So, when it comes to demand and supply planning, how should it be done - by product line or by industry? This is the question we plan to answer here.

PROCESS CENTERED SUPPLY CHAIN MANAGEMENT

Some years ago, Dow Corning joined the Supply-Chain Council, an independent, non-profit consortium of more than 800 companies focused solely on researching and applying best practices in supply chain management. Based on the Supply-Chain Council's recommendation, Dow Corning adopted the practice of applying a "process-centered" approach to supply chain management. What does that mean when applied to the demand/supply planning process? The key objective here is to create a flexible supply chain that continually keeps supply aligned with market demands. But how can we accomplish this?

A process design team was formed which recommended a simple four-step supply/demand planning process, which is shown in Figure 1.

The operational forecasting process for individual SKU/plant combinations already existed with the ERP system; however the time horizon was not as long as the total supply chain. (The operational forecasting process is that where forecasts are prepared bottom-up, i.e., first forecasts of SKUs are prepared, which are then aggregated to get product family forecasts.)

The new process was designed to complement the existing process, which was mid-term, "tactical" forecasting. (Here forecasts are prepared using top-down approach, i.e., first product family forecasts are prepared, which are then drilled down to SKU levels, using a ratio of each SKU to the product family. …

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