Overview

Large benefits which are achieved by Supply Chain Management are accredited to the reduction of inventories, esp. to the decrement of safety stocks. While safety stocks are mainly influenced by uncertainty, it is appealing that most effort should be spent on the reduction of uncertainty. Two sources of uncertainty are known in supply chains:

• process uncertainty (e. g. unreliable production processes, fluctuating lead-times etc.) and

• demand uncertainty (difference in planned or estimated demand and actual sales).

The purpose of Demand Planning is to improve decisions affecting demand accuracy and the calculation of buffer or safety stocks to reach a predefined service level. All decisions in the whole supply chain should be based on already fixed (accepted) customer orders and planned sales or forecasts, the latter ones are determined in the Demand Planning process. Therefore, the performance of each supply chain entity depends on the quality of the demand plan. This also implies that these figures need to be the result of a collaborative effort.

The next section explains the different tasks of a demand planning process and shows which of the tasks should be supported by an APS.

7.1 A Demand Planning Framework

What are the results of Demand Planning and who needs it? This should be the first question in a Demand Planning implementation. Figure 7.1 shows all Demand Planning tasks and its planning horizon using the output of Demand Planning. For example, mid-term...