Written by Ruvisha Pillay | Contributors Elaine Marinaki, Alan Wood

Planning for stocked items requires a forecast of the future demand. The forecast is an input into the recommended order calculation and is also used to convert the replenishment cycle, safety stock and lead time figures from days into units. It is therefore important to know the demand streams which affect your item. There are several types of future demand, namely sales demand, BOM demand and distribution demand. A stocked item may have one or several of these demand streams. The app will create a forecast for each demand stream that is applicable to an item. This article aims to help you understand these demand streams.

We’ll use the example of umbrellas to describe each of the demand streams.

Sales Forecast - this is the simplest demand stream. You have sales demand on your item if your item is selling from a location in its own right. For example, you sell umbrellas from Warehouse ABC. Therefore, those umbrellas have a sales forecast of what is projected to sell from Warehouse ABC.

Distribution Forecast - this refers to Distribution center (DC) demand. This demand stream is relevant if you supply your item to one or more locations from a central warehouse or distribution center. For example, you sell umbrellas out of Warehouse ABC. You also supply branches like Store PQR and Store XYZ. The supply required for those stores will form your distribution demand. It’s important to note that the distribution demand required for Store PQR and Store XYZ is not the actual sales forecast for those stores, but rather their required stock from Warehouse ABC. See example below showing the stock on hand and sales forecast for the stores. The distribution forecast reflected on the inquiry screen for Warehouse ABC will be the figures in the green cells.

BOM Forecast - this refers to BOM demand and is applicable to items that form part of a finished good or sub-assembly. The forecast will be the requirement of the item for the manufacturing of the finished item. For example, Standard Umbrella could sell on its own from Warehouse ABC. It could also be a raw material for Fancy Pants Umbrella where the Standard Umbrella gets ribbons, beads and lace added to it to form the finished item or sub-assembly. The BOM forecast shows the expected usage of the Standard umbrella to manufacture the Fancy Pants Umbrella.

To summarize, an item could have one or all three demand streams allocated to it. In this article, we used the umbrella as an example. See image below. The umbrella sells out of a location and has a sales forecast. The umbrella is also supplied from a distribution center to branches, it therefore has a distribution forecast as well. This standard umbrella is also a raw material for a fancier umbrella, it therefore will also have a BOM forecast. The total of all demand streams applicable to an item are used in the order calculations.

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