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Net Demand Planning Process

This is an optional feature that is helpful to any company that is tasked with managing customer inventories and/or has access to their customers sales or consumption data. This feature needs to be enabled in your account by communicating with support. It is only available with the Sales and Operations Planning add-on.

Companies that sell to retail or are responsible for maintaining inventory at their customer location, are often responsible with ensuring that the inventory is maintained at the correct levels. Often this is done using spreadsheets by collecting inventory data and estimating consumption at the customer using averages or other methods. If your customer shares their point of sales (POS) or consumption data and/or their inventory levels, you can leverage this data to generate a sales forecast at the customer which will then consume the inventory at the customer and in turn trigger a requirement based on a “days on hand” inventory level commitment (if applicable) at your customer. This requirement is then offset by the delivery time to your customer to become your projected shipment to you customer. By using the sales or consumption of your customer, you can derive a more accurate forecast and facilitate more robust communication with your customers and suppliers.

The Net Demand Planning feature automates all this manual effort directly in the demand plan by forecasting the sales at the customer using point of sales (POS) or other customer consumption data and netting that forecast against the customers projected inventory and order points.

Benefits:

  • Removes the manual processes most companies employ to meet their customers inventory requirement based on their sales objectives.
  • Integrates customer supplied data to promote further supply chain connectivity
  • Improves the quality and predictability in demand planning and eliminates the bullwhip effect found in most supply chains as exhibited above. Demand fluctuates wildly the further from the pull of the customer
  • Promotes robust communication with customers and suppliers with a deeper understanding of what is happening at the point of sale.

Net Demand Plan Layout

The net demand plan feature is applied within the context of a customer with the standard demand plan view. When enabled, the following additional data is available:

  1. POS: The customers sales history is the basis of the POS statistical forecast.
  2. POS Plan: The statistically derived and is editable in the same manner as documented in the editing a demand plan article. It may be uploaded via the POS Demand Plan Upload (userdefinedsopforecast.txt) file. Edits are not overwritten by a new statistical forecast unless removed by the user by initiating a revert to statistical.
  3. Estimated Retail Inv.: is a value that is provided by the customer and is uploaded as part of the Estimated Retail Inventory Table (retailinventory.txt) file. This is the customer on hand value that the plan is net against. The current inventory level that the POS demand plan is netted against is estimated using the snap shot date (the date that the inventory is reported) as the starting point for the calculation. The calculation is inventory at snapshot date + shipments made to customer - POS sales at the customer. From there the Estimated Retail Inv. value is calculated as Est Retail Inventory - POS Plan + Net Demand Plan.
  4. Estimated Days Cover: Calculated by dividing the Estimated Retail Inventory by the POS Plan per period.
  5. Required Days Cover: This is either manually entered or uploaded via the Days Cover (dayscover.txt) file.
  6. Required Customer Inventory: Calculated by summing the forward POS plan over the Required days cover by period. This is the level of safety stock inventory that is required at the customer.
  7. Net Demand Plan:  This is the shipment to the customer in order to prevent the customer estimated days cover to not go below the required days cover. The Net Demand Plan may be offset by the customer requirement to accommodate shipping time to the customer. For example, if the there is sales spike planned for October and it takes 30-days to ship the inventory to the customer, the net demand will show the requirement to be shipped in September. The value is maintained in customer maintenance as described in the article Net Demand Planning Settings / Setup.
  8. 4-P Lift: This is an optional increase or decrease of the Net Demand Plan. Read the article 4-P Planning Work Flow to learn more.
  9. Total Demand Plan: This is calculated as Net Demand Plan plus any 4-P entries.

Running a New Plan

Running a Net Demand Plan is the same as running a standard Demand Plan. Please read the article to Demand Planning Detailed Process Steps learn more.

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