Setting up an Item Record for Demand Planning
Did you know that the NetSuite Supply Planning (MRP) solution replaces Time-Phased Planning, with more features and better performance?
New customers should use the new Supply Planning (MRP) solution. Existing customers should develop a plan to move from Time-Phased Planning to the new solution.
Use the following procedure to set up an item record for demand planning.
To set up an item record for demand planning:
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Go to Lists > Accounting > Items.
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Beside the item record you want to set up, click Edit.
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Click the Purchasing/Inventory subtab.
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In the Lead Time field, enter the average number of days between ordering this item from the vendor and receiving it. For example, if the item usually takes ten days to arrive from the vendor, enter 10 in this field.
Including an accurate lead time for an item is important for creating more accurate supply plans and item orders.
If no value is entered, then the default value from the Set Up Inventory Management page is used.
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Optionally, enter a Safety Stock quantity. This is a buffer amount of stock you want to keep on hand to account for variations in demand.
For example, if you enter 5, after demand projections are made, an additional 5 units are added to the quantity required on supply plans.
If you use Multiple Units of Measure, safety stock is always planned in stock units.
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In the Expected Demand Change field, enter a percentage to augment the forecasted amount.
For example, demand is projected at 100 units for this upcoming July based on sales last July. But you know that sales for this item have been trending upwards the last two months, and you want calculations to mirror this trend. You can enter a percentage to increase the expected demand beyond the calculated amount.
This setting is used only when the forecast method for a plan is set to Seasonal Average.
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Choose one of the following options in the Lot Sizing Method field:
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Lot For Lot – This selection means orders are suggested for procurement based on the exact projections for that day. The suggested order quantity may vary from day to day depending on demand calculations.
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Fixed Lot Size – There are two types of behavior for fixed lot size, when the quantity required to balance supply and demand is greater than the fixed lot size.
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Fixed Lot Size - Select Fixed Lot Size when you need multiple individual work orders of the specified lot size.
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Fixed Lot Multiple - Select Fixed Lot Multiple when you need one work order that is equal to a multiple of the specified quantity.
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Periods of Supply – This option generates aggregated purchase orders or work orders based on the overall demand requirements extended over a designated period. For example, weekly.
For example, in lieu of creating multiple purchase orders for each instance of demand, you can consolidate demand into one order. This order is created by the demand planning process for all items required within the next two weeks. By sending a consolidated purchase order to a vendor, the vendor can ship all items at one time, potentially resulting in reduced shipping costs.
Important:Be aware of costs from vendor holding charges. You can consolidate orders for a period. However, after being consolidated, the Bill of Materials (BOM) for that specific work order on that specific level is used for subsequent levels.
If you use Multi-Location inventory, this field is on the Locations subtab.
Complete the following steps based on the Lot Sizing Method you have selected.
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If you selected Fixed Lot Size as the lot sizing method, enter a quantity in the Fixed Lot Size field. This is the quantity that procurement of this item is always based on, regardless of demand projections.
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If you selected Periods of Supply as the lot sizing method, make a selection in the Periods of Supply Type field:
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Interval – (Default) Order aggregation starts when a requirement is established and continues for a fixed period defined in the Interval field.
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Monthly – Order aggregation starts at the beginning of each month. The requirement date is always the first day of each month.
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Weekly – Order aggregation starts at the beginning of each week. The requirement date is always the first day of the week as defined under Company Settings.
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In the Period of Supply Increment field, enter a number from 1 to 90. The default setting is 1.
The increment starts on the first day an order is required. From the first day, NetSuite aggregates all orders in the increment. Orders are placed on the first day of the period.
The Period of Supply Increment field is enabled only when you select Interval in the Periodic Lot Size Type field.
For an Interval setting, NetSuite calculates orders as shown in this diagram.
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Lead Time is 2 Days
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Interval period is 3 days
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Day 5 demand is 20
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Day 6 demand is 50
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Day 2 on hand quantity is 10
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Day 3 on hand quantity is 50
Orders are grouped based on a 5 day period. Therefore, on day 2 when NetSuite looks ahead 5 days, the total demand is 70. On day 2, the on hand quantity is 10. NetSuite calculates that 60 are required as of day 2. The work order uses this requirement of 60 to determine the subsequent levels of work.
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The Supply Type field shows the method by which more stock is procured, either Purchase or Assembly. On assembly items, if you have enabled the Allow Purchase of Assembly Items preference, you can choose whether to build additional supply or purchase it.
For details about using this preference, see Setting Up Demand Planning.
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The Demand Source field determines where demand data is sourced for an item.
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Forecast from Demand Plan – Source only the item's demand plan record.
Note:When you choose this setting, a sales order with a related work order generates a supply plan for the sales order. In addition, the Mass Create Work Orders page suggests a supply for the sales order.
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Entered and Planned Orders – Source open orders and use the expected ship date as the demand date. If the item is a member of an assembly, demand for the assembly is included demand calculations for the item.
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Order and Forecast – Calculates demand for an item by including both the forecast amount and the amount on orders that have been entered.
Forecast demand for an item is calculated by combining the following:
(Quantity forecast over time) + (quantity on sales orders and invoices entered)
For example, Item #AB1001 is forecast to sell 100 units in January. Sales orders are already entered for 20 units. Using this method, demand is calculated as 120 units.
The total forecast includes the forecast demand and the demand order quantities from transfer orders, work orders, and sales orders.
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Forecast Consumption – Calculates demand for an item by subtracting from the forecast quantity any item quantities on orders entered. This removes duplication if an order is already included as part of a forecast.
Demand for an item is calculated as follows:
(Quantity forecast over time) - (quantity on sales orders and invoices entered)
For example, Item #AB1001 is forecast to sell 100 units in January. Sales orders are already entered for 20 units. Using this method, demand is calculated as 80 units.
As shown in another example below, orders are forecasted for 20 units each on days 1, 5, and 9. Actual orders are entered for 5 units each on days 2, 7, 8, and 10.
For planning purposes, indicate that the order for 5 units on day 2 is part of the forecasted 20 units for day 1. You would account for this by decreasing the day 1 forecast quantity to 15 units.
The bottom row shows the adjusted aggregate totals.
When you use the Forecast Consumption demand source method, set the following on the Location subtab of the item record:
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Forward Consumption – Number of days after the order date to consider
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Backward Consumption – Number of days prior to the order date to consider
Backward and forward consumption days determine the time period considered for each sales order when a forecast amount is consumed to calculate demand. If an order falls within the consumption time period, that order quantity is calculated as being consumed. Then, the forecast is adjusted to account for the order consumption.
Note:NetSuite always considers backward consumption first.
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The forecast closest to the order in the backward time period is consumed first.
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The forecast closest to the order in the forward time period is considered if there are remaining quantities to be consumed.
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Note:Only sales order and invoice quantities can consume forecast quantities. Demand from transfer orders and work orders does not consume forecast quantities.
For additional details, see Forecast Consumption Examples.
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Demand Time Fence – This field defaults to the number entered in the Default Demand Time Fence field. Verify the default or enter a number between zero and 365 to determine the demand time fence for this item.
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Planning Time Fence – This field defaults to the number entered in the Default Planning Time Fence field. Verify the default or enter a number between zero and 365 to determine the planning time fence for this item.
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Reschedule In Days – Enter a number between one and 90. This is the maximum number of days that the order can be advanced from the current day. For example, if you enter 10, an order for this item can be moved up ten days, but not eleven or more days. This field defaults to be blank.
Note:If this field is left blank, NetSuite does not make recommendations to reschedule orders for this item to an earlier date.
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Reschedule Out Days – Enter a number between one and 180. This is the maximum number of days that the order can be delayed from the current day. For example, if you enter 10, an order for this item can be moved to ten days later, but not eleven or more days. This field defaults to be blank.
Note:If this field is left blank, NetSuite does not make recommendations to reschedule orders for this item to an earlier date.
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Click Save.
Now, this item can be used on demand plans and supply plans.