Demand Planning - Basic Principles

The basic principle is this:

• Generate a (future) demand plan based on past and/or future sales performance.

• Use the demand plans to generate supply plans.

• Use the supply plans to create purchase orders. In the case of assembly items, these will be 'Work Orders' - orders to cover all components of an item (for example jar of olives and the label item as well).

Before this can be done, all items need to have these fields correctly set:

• Lead time (in days)
• Replenishment method ('Time Phased')
• Safety stock level (the minimum amount of stock deemed necessary for normal operations).

Lot Sizes

Ensure these are set to the supplier's minimum order quantities. This will prevent small, incremental orders being generated. Instead, it will group smaller orders into larger ones, to be ordered earlier, that meet the MOQ.

Work Order Lead Time

On assembly items set the 'Work Order Lead Time' to something. This is the number of days it takes to put together an item (for example a jar of olives with label and tag). If 100 can be assembled per day, set the value to 0.01 days per unit. Setting this value correctly ensures that the system gives a lead time between the arrival of components and the availability of the finished product.