In my last inventory planning post, I describe standard demand process calculation. If we look at this through the prism of the production planning, demand process has some specifics. We can call this as Net Actual Demand Against the Forecast.

When we use Production Forecast for production planning, we have two new terms:

  • Actual Demand: Sales Orders and Components needed in Production Orders
  • Forecasted Demand: Production Forecast

The netting of forecasted demand and actual demand for sales items is in principle fairly straightforward. If we have some quantity in Sales Order and in Production Forecast in the same period, forecasted demand will be decreased for the Sales Order quantity (actual demand). If actual demand exceeds the forecasted demand in a forecast period, this reduces the forecasted demand to zero, and the total demand then equals the actual demand.

If we have only Production Forecast quantity for one item in one period:

Example:

Production Forecast = 200 units; Sales Order = 0 units

Forecast Demand = 200 units; Actual Demand = 0 units; Total Demand = 200 units

If we have Production Forecast quantity and less quantity on Sales Order for one item in one period:

Example:

Production Forecast = 200 units; Sales Order = 50 units

Forecast Demand = 150 units; Actual Demand = 50 units; Total Demand = 200 units

If we have Production Forecast quantity and the same quantity on Sales Order for one item in one period:

Example:

Production Forecast = 200 units; Sales Order = 200 units

Forecast Demand = 0 units; Actual Demand = 200 units; Total Demand = 200 units

If we have Production Forecast quantity and greater quantity on Sales Order for one item in one period:

Example:

Production Forecast = 200 units; Sales Order = 250 units

Forecast Demand = 0 units; Actual Demand = 250 units; Total Demand = 250 units


P.S. Blanket Orders does not affect on demand.