1. SCM (Supply Chain Management)
  2. Inventory Management
  3. Advanced Inventory Management
  4. Demand Planning
  5. Calculating Item Demand

Calculating Item Demand

You can calculate item demand to forecast the expected demand across a future period. NetSuite does not currently consider past forecast quantities. The Calculate Item Demand Plan page initiates the process to assess previous demand for items and calculate the estimated upcoming demand.

For example, you can look at an item’s demand across the previous six months to forecast the expected demand for the next six months.

To calculate demand, choose a projection method, and then determine what data to use for analysis. Then determine the length of the period to forecast for. NetSuite uses this forecast data to project estimated demand across a designated time period in the future. Then NetSuite suggests a plan for orders accordingly.

After you submit the Calculate Item Demand Plan page, a demand plan is created for each selected item. Demand plans record the expected future demand for an item based on previous demand.After demand plans are created, you can view and edit the demand plans and use them to create supply plans for items.

Note:

If there are no rates for the estimates/quotes created, they will not appear in the Demand Plan. If rates are 0, then the quantities entered are also not considered.

To calculate item demand:

  1. Go to Transactions > Demand Planning > Calculate Item Demand Plan.

  2. If you use NetSuite OneWorld, select a Subsidiary.

  3. If you use the Multi-Location Inventory feature, select a Location.

    The list of items that appear is filtered to show only items for the selected location that are time-phased replenishment items.

  4. You can forecast demand for items in one of two ways:

    • Determine a time frame for examining an item's historical sales data to analyze previous sales trends and forecast future sales with similar trends.

    • Use current demand such as opportunities, quotes and existing sales orders to forecast future sales. This method is not based on a calculated forecast.

    Select a Projection Method:

    • Linear Regression – Uses previous demand to project future inventory based on the ordinary-least-square regression method.

    • Moving Average – Uses the moving average of historical demand to calculate the overall average stock level needed. Then project future stock levels using that overall average.

      Based on the historical duration parameter, NetSuite calculates the moving average demand in the past. The moving average is intended as a smoothing function to minimize demand variations. This average is used for all periods in the projection.

      For example:

      • Today is 2/1/2011.

      • Historical duration is set to 3 months.

      • Projected duration is set to 2 months.

      The following results:

       

      10/1/2010

      11/1/2010

      12/1/2010

      1/1/2011

      2/1/2011

      3/1/2011

      Historical Demand Data

      5

      4

      5

      6

       

       

      Projected Demand Data

       

       

       

       

      5

      5

    • Seasonal Average – Use previous demand to examine the seasonal trend of inventory flow, and then project a similar seasonal trend for future stock levels.

      Note:

      Using this method, the projection interval must be set to Monthly intervals.

    • Sales Forecast – When using NetSuite for your sales operations, this option uses forward looking sales forecast data to project inventory demand.

      When you use the Sales Forecast method, transaction types sourced for projection calculations are the following:

      • cash sale

      • invoice

      • estimate

      • opportunity

      • sales order

      • item fulfillment

      The following table shows the date and quantity considerations.

      Transaction Type

      Date

      Quantity

      Estimate

      • Estimates without any associated sales orders, invoices, or cash sales

      Expected Ship Date

      Note: Data is not referenced when an expected ship date is not populated.

      Estimate Quantity

      Opportunity

      • Opportunities without any associated sales orders, invoices, or cash sales

      Expected Ship Date

      Note: Data is not referenced when an expected ship date is not populated.

      Opportunity Quantity

      Sales Order

      • Only approved sales orders

      Expected Ship Date

      Note: If an expected ship date is not listed, then the Transaction Date is used.

      Quantity remaining that is not yet shipped

      Item Fulfillment

      • Only for fulfillments associated with a sales order

      Transaction Date

      Quantity Shipped

      Cash Sale

      • Standalone cash sales

      • Cash sales created from estimates

      • Cash sales created from sales orders when Advanced Shipping is disabled

      Transaction Date

      Cash Sale Quantity

      Invoice

      • Standalone invoice or invoice from estimate

      • Invoice created from estimate

      • Invoice created from sales order when advanced shipping is off

      Transaction Date

      Invoice Quantity

  5. In the Projection Interval field, make a selection to determine the period of time demand is calculated for. For example, select Weekly to project how much demand is expected per week, as opposed to per month.

    If you are using the Seasonal Average method, only a Monthly interval is supported.

    The first date of the period for which you want to forecast demand displays in the Projection Start Date field.

  6. In the Projection Duration field, define the number of periods to calculate projected future demand. For example, enter 6 to calculate demand over a six month period.

    Note:

    This number cannot be a decimal value. For example, if you enter 3 in this field and selected an interval of Months, then demand is forecast for a three month interval.

  7. Historical Analysis Duration – Define the number of periods in the past to calculate demand projection

    • For Moving Average, enter the number of periods in the past to calculate the next moving average value.

    • For Linear Regression, enter the number of periods in the past to determine the linear regression projection.

    • This field is not required when using the Sales Pipeline projection method.

    • For Seasonal Average, enter the number of periods in the past to calculate the future demand.

  8. Select all items you want to calculate demand for.

  9. The Alternate Source Item field enables you to choose a different item to use that item's historical data to calculate demand.

    For example, you are setting up Item A for demand planning but Item A does not have an extensive sales history. You can choose Item B as an alternate source for historical data. Then, when demand calculations need to be made for Item A, NetSuite uses Item B's history for the calculations.

    You can select only an item that is of the same item type to be an alternate source. For example, if the original item is an inventory item, the alternate source item must also be an inventory item.

    Note:

    The expected demand change for the original item is used when a demand plan is created using an alternate source item.

  10. Click Submit.

After you submit the page, demand plans are created for all selected items. To view the plans, go to Transactions > Demand Planning > Item Demand Plans..

When calculating demand, NetSuite includes transactions dated before the start date for items that have a demand source setting of Entered and Planned Orders. These transactions are considered as existing demand orders on the start date of the planning calculation:

Sales orders and purchase orders dated before the start date are expected to be received or shipped the day when the supply calculation occurs.

If an item has no transaction history, you can use an alternate item's history, enter your own forecast, or import the sales order history.

Assemblies and Demand Calculations

If an assembly's components are set to calculate the demand source from Entered and Planned Orders, you do not need to create demand plan. If you select the assembly to calculate supply, the necessary orders are created when that calculation occurs for the assembly and its components.

CSV Import

Account administrators and other users with Import CSV File permission can use the Import Assistant to import demand plans. For more information, see Importing Demand Planning Data for Items. For general information about using CSV import for items, see Items Import.

SOAP Web Services

SOAP web services programs can be used to add, update, delete, search, and retrieve data for demand plans. See Item Demand Plan in the SOAP web services section of the Help.

Related Topics

General Notices