How Demand Variation Affects Operations Management - dummies

How Demand Variation Affects Operations Management

By Mary Ann Anderson, MSE, Edward J. Anderson, Geoffrey Parker

Demand isn’t always consistent; demand can vary for many reasons and your operations management is dependent on understanding these trends. Recognizing why demand varies also helps you increase your operation forecast’s accuracy. Specifically, watch for these factors that may trigger variations in your demand:

  • Cycles are wavelike occurrences that repeat over longer periods of time. They’re usually tied to economic conditions or the business cycle. Big-ticket items such as automobiles often display this type of pattern.

  • Irregular variations are changes that result from a one-time event. They’re not representative of normal conditions. A celebrity using a product in public that spurs fans to go out and purchase in mass and the sale of water bottles before a major weather event are examples of irregular variations.

  • Random variations occur without any known reason or explanation. They’re the unforeseeable and unexpected changes in demand.

  • Seasonal factors are regular variations that occur over and over and are related to some particular event. Products and services with significant seasonal demand include air conditioners and snow shovels (which vary by time of year) and back-to-school clothing and supplies (which vary according to certain events).

    Some industries have “seasonal” demand patterns that occur more frequently, such as the weekly increase in customers on Fridays and Saturdays at restaurants. Seasonal factors can sometimes be self-induced, as in end-of-quarter or end-of-year sales or promotions to help a firm make sales quotas.

  • Trends are a long-term upward or downward movement in demand. When products experience a growth or decline in the market, trends tend to emerge. Examples include the growth of organic products in the supermarket and the decline in sales of paper books in favor of the electronic variety.