Demand Planning - Misconceptions

In the manufacturing sector, much attention is given to demand planning. This method of production has promised to drive the entire schedule for a factory, practically removing any decision-making about materials supply, future orders, and production scheduling from a manager. While these techniques are useful, in many cases they have been oversold as a panacea to fix all of a facility’s problems. A capable manager knows that there are limits to this method of production planning.

Demand planning cannot drive your entire production facility

There is a misperception that manufacturing facilities that implement all of the principles of demand planning will have a perfect production system that will create schedules that can make product at the height of efficiency. The reality is that it is just not this comprehensive.

While following the principals of this method willde give you an accurate picture of what orders the facility needs to fulfill, it cannot suggest a schedule of when to produce it. Using a list of orders as a master schedule is setting up your facility for cost overruns.

While the basic principles can provide a good indicator of need within a specified timeframe, it takes a comprehensive, integrated scheduling system to turn those results into a master schedule that optimizes your facility’s resources. Production schedules must account for much more than just what needs to be produced.

Demand planning doesn’t account for constraints

One of the major flaws when dealing with this planning method is that it only considers the needs of the customer. There is no focus on the situation on the factory floor, in purchasing, or with personnel. Limiting factors on a production line are not considered at all. While following demand principles (without incorporating any other planning method) will ensure that your facility can meet demand, it will be next to impossible to make this product in an efficient manner.

Say you have an order for a single product. While demand planning may meet high customer demand for that single product, it does not take into account the maintenance or loading time to convert lines to accommodate the production increase. There is also no consideration of the number of employees that are trained to make that product, potentially leading to either staff shortages or overtime. It also does not account for the additional cost of ordering a higher amount of raw material to make that product.

While demand planning techniques can be a useful production planning tool, it is not a comprehensive planning system. That’s why it only makes sense to implement these principles along with a program that has an overview of every aspect of production in a factory.