4 Demand Planning
4.1 Demand Planning Process Overview
The result of the demand planning process is the establishment of inde-
pendent requirements which will trigger the planning activities as distribu-
tion, production and procurement planning. Usually a sales forecast is the
key input to the demand plan. This sales forecast is consolidated and
checked regarding plausibility, probably checked against a statistical fore-
cast and corrected according to the experience of the planner before releas-
ing it for the subsequent planning steps. Figure 4.1 shows this process for a
very simple supply chain with global demand planning and single sourcing
local production planning:
Sales Logistics Planning Local Production
ISend Forecast Update :
!
Consolidate
Sales Forecast
!
Check Plausibility,
Compare with History &
Statistical Forecast
+
Adjust Sales Forecast
to Demand Plan
J
+
Release Demand Plan
t
I Perform MRP
I
Fig. 4.1. Example Process Chain Diagram for Demand Planning
J. T. Dickersbach, Supply Chain Management with APO
© Springer-Verlag Berlin Heidelberg 2004
22 4 Demand Planning
The monitoring of the forecast accuracy and a feasibility check against the
planning constraints (e.g. capacity) are further common process steps. De-
pending on the business requirements there might be many others.
4.2 Basics of Demand Planning
4.2.1 Characteristics, Key Figures and Structure Overview
The most elementary questions in demand planning are
- on which levels (product, product group, ... ) is planning performed?
- in which granularity of time (weeks, months) is planning performed?
- which data is needed?
These questions have to be answered from a business point of view before
starting with any kind of implementation.
In APO the planning levels are represented by 'characteristics', the
granularity of time corresponds to the 'time bucket' and the data is linked
to 'key figures'. Aggregation and disaggregation (drill down) of the data
according to the characteristics is one of the main advantages to a simple
spreadsheet. Though data is maintained on all levels, it is always stored on
the most detailed level (i.e. with each characteristic having a value) to keep
the planning consistent. In this case the disaggregation is usually done ei-
ther according to a different key figure or- as default- pro rata (the differ-
ence between the new and the preceding value is distributed according to
the existing ratios). If the preceding value is zero, the new value is distrib-
uted equally. For the description of all disaggregation possibilities have a
look into the system documentation.
Both the characteristics and the key figures are technically represented
by 'info objects'. These info objects contain the data format definition, the
name of the characteristic resp. the key figure plus other properties. The
info objects are maintained with the transaction RSD I.
Since the understanding of the principle of aggregation and disaggrega-
tion with all its implications is the most important part to understand DP,
this topic is stretched a little more by an example: planning shall take place
on the levels sales organization, location, product and product group. Each
product is member of only one product group and each sales organization
is linked to only one location (this structure is represented by the charac-
teristic combinations). The relevant data (i.e. key figures) are sales forecast
and demand plan (the demand plan becomes relevant for planning), fig-
ure 4.2.
