Demand planning
Demand planning produces the consensus forecast of future demand that supply decisions run on. It combines a statistical baseline built from sales history with market input from sales, marketing, and key customers, reconciling them into one number per product or family per period. That number feeds S&OP, the master schedule, and material planning, so its quality sets the quality of everything downstream.
Examples
Baseline plus market input: The statistical model projects 4,200 controllers a month for Q3. Sales adds 800 a month for a new distributor going live in July. The consensus locks at 5,000 with the increment flagged as an assumption; when July orders land at 310, the August cycle cuts the overlay to 400 instead of carrying dead volume.
De-biasing an input: A planner tracks each input stream separately and finds the sales overlay ran 12 to 18% high for six straight months. Future overlays get discounted by the trailing bias, and forecast accuracy at the three-month lag improves from 71% to 82%.
Definition
The process starts with a statistical baseline: forecasting models project each item or family from history, trend, and seasonality. Planners then layer on what the model cannot see (a distributor launch, a customer ramping a new program, a planned promotion) and reconcile the inputs into a consensus locked during the S&OP demand review. Sales input gets screened for bias on the way in, since quota math reliably pushes it optimistic.
Demand planning predicts demand; demand management shapes it, steering customers with pricing, promotions, and quoted lead times toward what the supply chain can actually deliver. Mixing the two corrupts both: a forecast bent to match supply is no longer a forecast, it is a wish with a spreadsheet.
The discipline is in measurement. Track forecast accuracy and bias at the lag that matters (the lead time of your longest component, not last week), feed the measured error into safety stock sizing, and make sure MRP consumes the consensus number rather than a side spreadsheet someone trusts more.
Related Terms
Sales and operations planning (S&OP)
Material requirements planning (MRP)
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