Order-Planning Model Based on the Values of Capacity and Inventory

Contract manufacturers always complain the accuracy of forecasts given by brand customers. This fact induces manufacturers’ burden on preparing extra materials and reserving extra capacities. To ensure profits, contract manufacturers have to add extra number on quotations. It makes the relations between brand customers and contract manufacturers even more brittle. Therefore, well-organized communication, such as constructing a collaborative forecasting and production planning system, is the key to link both parties tightly. In practice, providing a clear definition of production models to guide customers during placing orders is needed. In this paper, the concept of “product definition triangle” is introduced as the heart of order-planning model. This paper provides some ideas about how to increase the accuracy of forecasts, lower the inventory level, and improve the effective capacity usage, by using the order-planning model. The concept provided by this paper can eliminate the contradiction between brand customers and contract manufacturers effectively.