Chances are that your existing ERP or accounting system does not have a good way for you to forecast demand. Many manufacturers and wholesale distributors have come up with very clever ways of tricking the system to include Supply Chain Forecasting and forecasts. Many of these strategies work but very few of them are ideal. This article focuses on two ways that companies often try to work around the lack of forecasting capabilities in their systems and why these strategies may not be ideal or conducive to effective distribution requirements planning (DRP) in a distribution environment or for material requirements planning (MRP) in a manufacturing environment.
Some companies use an ERP system that allows them to adjust future demand. This is typically done based on a future period within their inventory calendar. The problem here is that the inventory calendar is typically setup by month while MRP plans are most often weekly. Second, demand adjustments are typically based on an item in a particular warehouse which limits the user considerably – especially if they have a lot of items in a lot of different warehouses (hundreds or thousands of manual demand adjustments) or in situations where they want to forecast by customer.
In all practicality, demand adjustments are just that – an adjustment to take into account a general increase or decrease in overall demand in a future or past period. They are by no means designed for use as a forecast and can severely limit the demand planning process.
Fake Sales Orders
Another common way for companies to cheat the system is to create a sales order which they somehow designate as a Forecast Sales Order as opposed to a Real Sales Order. This is quite clever and can actually work quite well in many situations. However, serious consideration should be given to limitations of this strategy.
One of the major limitations of creating fake sales orders for forecasting is the fact that an actual sales order will not consume (or reduce) the forecast or the fake sales order quantity resulting in MRP or DRP planning for duplicate demand. The reduction of the fake sales order quantity must be a manual process to avoid this issue. This can be problematic even in the smallest companies. For example, what if the person who manages this process is on leave? MRP will run and the planners will see demand for both the fake and the actual sales order. If they are unaware of this process they may accidentally plan to buy, to transfer, or to make excess quantities causing stock-outs for raw materials and excess stock and increased carrying costs for other items.
Anytime Supply Chain software includes a real Supply Chain Forecasting module where forecast sales orders and real demand consume the forecast to avoid duplicate demand within the MRP or DRP plan.
e2b teknologies is the original developer of Sage 500 MRP software. The Company continues to develop new features for Sage 500 MRP software and now offers Anytime Supply Chain software, the next-generation cloud MRP software and cloud DRP software is available for Sage 500, Sage 300, Sage 100, Intacct Financials, Intuit QuickBooks, and other accounting and ERP business applications.
- Anytime Supply Chain Software Videos
- 23 Common (and Critical) MRP/DRP Mistakes and How to Avoid Them
by James Mallory Google+