Demand Planning calculates Demand based on historical data, anticipated demand and/or actual orders (the system accounts for demand fluctuations and seasonality).
This feature analyzes the stock demand needs, determine replenishment requirements, and then suggests purchase orders according to a supply plan that will add stock as needed/required. The system will compute for the supply needed based on the demand. There are different options as well on how demand will be computed. It will not just be based on historical data or past sales (unlike Advanced Inventory Management that only considers historical data)
Supply Allocation replaces and expands the current inventory commitment feature to include functions that allow users flexibility in allocating product to demand orders, and management of allocations across products. By allocating future and current supply and using allocation strategies that can be assigned to customer’s orders, this maximizes inventory investment to avoid committing current inventory to customer’s orders that are far ahead in the future. This feature helps to fulfill customer’s requirements for the right product, quantity, and location at the right time.
Before, sales orders commitment would only be on available quantities. If there are no available quantities (even if the said item is already awaiting to be received) the said Sales orders would be backordered. With Supply Allocation, users can now set a portion of these pending receipts to specific Sales Order, depending on the strategies set in the system.
Demand Planning is used to determine how much should be purchased based on the demand of the item. This functionality basically suggests to the users how much should be ordered to be stored in the warehouses to meet the demand. Supply Allocation is used, on the other hand, to allocate existing Purchase Orders to be received. For supply allocation, this works just like commitment wherein the order will be allocated depending on the set parameters in the strategy.
So, how does the two work with each other?
Demand Planning determines how many are to be ordered, then after these PO has been created/generated, the Supply allocation would then allocate these quantities to the orders:
For example, we have an item with these demand (all of which are backordered):
This is using Time-phased replenishment method (with forecast from demand plan as its demand source)
The demand plan is computed as follows, I used the Moving Interval, hence this would pertain to the demand projections:
In which the Supply Plan is as follows:
The suggested/computed quantities in the Supply Plan can be ordered through the Order Items page.
After hitting submit, a Purchase Order will be created.
This order, can then be allocated on the Sales Orders (through the Supply allocation feature).
In which, the said 100 order as computed by the Demand Planning, is allocated to the SO which has the closest Supply Required By Date (as set in the Demand Preference tab under Setup > Order Management > Supply allocation):
If this order is received, the quantities will be specifically committed to this Sales Order.