When building a supply chain plan, there is only one forecast that matters.
This is the independent demand forecast. This represents the demand of the end customers.
You take this independent demand and work backward to determine the production schedule and volume for the next node back.
What Data Do You Need?
You need two pieces of supply chain master data to do this:
- Cycle Time – time needed to produce and have the intermediate product available to ship
- Safety Stock – amount of inventory to maintain based on statistical safety stock calculations
The cycle time tells you when production needs to start/end. And safety stock allows you to calculate volume needed in addition to the independent demand for the period.
What About Other “Forecasts”?
Do other “forecasts” like the production or purchasing forecast matter? Yes, of course.
However, they will be built off the master production schedule you create. You will also need input on non-typical capacity constraints. Examples of these include:
- Unplanned equipment maintenance
- Delayed raw material deliveries due to supplier issues
- Regulatory holds making product unavailable
All these cause changes to cycle times or available inventory. You should thus adjust your planning assumptions based on these.
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