26 Apr 2015

True demand for supply chain Planning

True demand for supply chain Planning

Quite often we get these questions from our constituents and Network members about the definition of demand.

1) Can I consider shipments as my demand?                                                            

True Demand and Net Demand

What if we had some supply chain execution issues and demand was not fulfilled?

2) Can I consider orders as my demand? What if we had unfilled orders that might have shifted to the next period?

3) How to distinguish gross demand from true demand and net demand?

4) Who are the different stakeholders that might be interested in different types of demand?

5) Is it correct to say, true demand should be used by the demand planning team while net demand should be used by the finance team? Why?

With these questions you can right away tell that there is no one correct answer to ‘what is demand? We need to probe the business activities and look at the overall operational execution to calculate the true demand. Definition of demand will vary by the organization and needs some thought process incorrectly defining it. Now the question is why one should invest time in doing all these?

The simple answer is - garbage in – garbage out! Unless you fix your demand calculation process, generating statistical forecast and reporting the errors on the dashboard is just for window dressing. One of our client director mentions – 99% accurate but 99% also full of garbage.

Because of such process importance we have a dedicated session in our workshops on ‘Data cleaning and adjustments for demand forecasting. We have one mini case study where attendees need to calculate the true demand based on the Ordering and fulfillment process.

Meanwhile, our white paper by Dr. Mark Chockalingam will help you to gather the thoughts that you need to think about while looking at the true demand. You can download the presentation from

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