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Forecast vs. Demand Plan – do you know the difference?

Demand Planning  

Do you know the difference between a forecast and a demand plan?

A forecast is a prediction of demand based on numbers seen in the past. Demand plan starts with the forecast but then takes other things into consideration like distribution, where to hold inventory, etc.

Dave Turbide said, “Most companies start with forecasts for each product at each final distribution point, that is, each outlet where the customer orders and receives the goods. The inventory, or replenishment plan, for each outlet (store, distributor, shipping point) places demand on the warehouse(s) that provide the goods, and on up the chain. Ultimately, this distribution plan leads to a picture of the demand at the factory.”

When done well, this process should result in minimal inventory while still meeting customer expectations. 

Advanced Planning Systems are Giving Manufacturers an Edge

It seems pretty straight-forward: a plant should plan production in such a way that the people and equipment are effectively utilized to produce products. True statement, but it’s a bit more complicated. First of all, you have to produce the right products. 

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