Introduction
In the context of supply chain planning, determining a consolidated demand is a fundamental step to ensure alignment between Sales, Operations, Finance, and Logistics. It is the first step to be defined and validated in a Supply Chain Planning project.
This guide gradually presents the different approaches to generating consolidated demand, from simple to more complex scenarios, including weekly phasing, billing adjustments, and dynamic demand updates.
Basic Approach
Forecast Only
Uses only the demand forecast as the planning basis. Common in early planning stages or when there are insufficient firm orders.
✅ Simple to execute and easy to maintain
⚠️ May not reflect the reality of actual orders
Orders Only
Uses only confirmed orders. Common in make-to-order (MTO) businesses with a long firm order horizon.
✅ Higher adherence to actual sales
⚠️ Does not allow medium/long-term planning
Orders & Forecast Combination
Simple Sum (Orders + Forecast)
The consolidated demand is the sum of forecast and firm orders. Requires forecast data to be regularly updated, reflecting only the balance.
Requires constant manual updating of the forecast balance to avoid double counting.
Maximum between Orders and Forecast
The higher value between the period forecast and total firm orders is adopted. If orders > forecast, use orders. If orders < forecast, use forecast.
💡 When combining orders with forecast, ideally both should be at the same level of detail, avoiding excessive complexity and custom rules.
Billing Consideration
In addition to forecast and firm orders, what has already been billed in the month is considered. Billing represents demand already served and can be used to adjust the forecast and calculate the remaining balance.
Billing Update Process
- 1Start with the total monthly forecast
- 2Subtract what has already been billed
- 3Compare the result with outstanding firm orders
- 4Consolidated demand is the maximum between forecast balance and remaining orders
Intra-Month Phasing
For greater granularity, the monthly forecast can be distributed across weeks or working days, creating an expected order entry rhythm.
Weekly Phasing
The forecast is distributed based on historical parameters per week of the month.
• Week 1: 10% of forecast
• Week 2: 20% of forecast
• Week 3: 30% of forecast
• Week 4: 40% of forecast
Remaining Working Days Phasing
The forecast percentage is dynamically adjusted by the number of remaining working days, with automatic recalculation of the expected rhythm.
Current Month Behavior (M0)
Throughout the month, instead of assuming linear behavior, demand phasing is used to define an expected order entry rhythm.
Phased Weekly Forecast
Past unmet demand is discarded each week. If in W4 nothing was sold, only the forecast of 40 is considered (expected for that period).
Accumulated Unrealized Forecast
Unmet forecast is added to the following weeks. If in W4 nothing was sold, 100 is considered (monthly total), as demand may still come in the final days.
Conclusion
The choice of methodology must be dictated by the specific demand variability and the order horizon. The main criteria are:
- Demand variability
- Firm order horizon
- Planning maturity level
- Availability of reliable data (billing, orders, history)
It is recommended to start with something simple (maximum between forecast and orders) and incrementally increase complexity as the organization's demand management maturity grows.