Forecast Consumption & Planning Strategies

The classical production strategies are make-to-stock and make-to-order, which determine the planning to great extent. In a typical make-to-stock environment planning is triggered only by independent requirements and therefore demand planning has a great significance. Sales orders provide merely information to monitor whether the forecasted quantities are appropriate. Typical industries where make-to-stock strategy is applied are commodities and consumer goods, since the same products are usually sold to many customers and the lead time of the sales orders is usually very short. The order life cycle for make-to-stock is shown in figure 5.1. There is always a balanced situation shown as a result of a production planning run. The initial situation – the demand of the sales order exceeds the forecast – is a result of inappropriate planning and should not occur. This situation is chosen for this example because it helps to clarify that sales orders are not relevant for production planning in a make-to-stock environment. The sales orders are excluded from pegging as well (and the sales order receives the flag ‘.pegging irrelevant’.). The forecast is reduced by goods issue according to the forecast consump tion settings in the product master.