Module 2 · Theory + SAP process

Demand & Production Planning

Demand forecasting methods, S&OP meetings, production planning, master production schedule, capacity checks and MRP logic in SAP.

Course reading

Understand the process

Part 1

From customer demand to a workable plan

A forecast is an estimate of future demand, not a firm customer order. Compare it with actual sales by product family to see whether it is consistently too high or too low. Sales and operations planning (S&OP) puts sales, production and finance around one agreed plan instead of allowing each department to work from a different number.

Suppose expected demand is 12,000 units, opening stock is 2,100 and the factory can produce 11,000. The available supply is 13,100, apparently enough. But if a promotional order adds 2,000 units or the factory cannot make the required product mix, the total number hides a shortage. Break the plan down by item, week and capacity constraint.

Part 2

Turn the plan into material requirements

The bill of materials lists the parts needed per finished unit. Material requirements planning (MRP) combines that list with stock, open orders, delivery time and lot-size rules to suggest what to make or buy. Check its exception messages and machine capacity before accepting proposals: an incorrect lead time or bill of materials creates confident-looking but unusable dates.

In SAP, the planner maintains future demand, runs MRP, reviews the proposed orders and then converts approved proposals into production orders or purchase requisitions. Record who owns every gap and when it will be resolved; otherwise a meeting can agree a number without making a deliverable plan.

What you must take away

Forecast error is normal; unmeasured forecast error is not.
S&OP exists to agree one number across sales, operations and finance.
MRP output is only as good as lead time, lot size and BOM accuracy.

In the SAP process

Maintain planned independent requirements for the forecast horizon.
Run MRP and review the exception messages before the order proposals.
Convert planned orders to production or purchase requisitions after the capacity check.

Case study

The forecast nobody owned

Setting. A consumer-goods plant where sales sent a monthly spreadsheet and planning re-typed it.

Problem. Finished goods piled up on slow lines while fast lines ran out. Sales insisted the forecast was correct; planning insisted it arrived too late to use.

How it was investigated

Measured forecast accuracy per SKU family for six months instead of at total level.
Timed the gap between forecast issue and MRP run.
Checked which SKUs were actually driven by promotions rather than base demand.

What was changed

Introduced a fixed monthly S&OP calendar with a locked cut-off before the MRP run.
Separated base demand from promotional demand so both could be judged on their own.
Published accuracy per family every month with a named owner per family.

Outcome. Planning stopped absorbing late changes silently; disagreements moved into the S&OP meeting where they could be decided.

Lesson: A forecast without a measured owner is a wish. Publish accuracy by family, by name, every month.

Illustrative composite of common shop-floor situations — no client names or confidential figures.

Practical template

S&OP monthly worksheet

Bring demand, supply, inventory and the gap onto one page before the meeting.

Family	Forecast	Firm orders	Capacity	Opening stock	Gap	Agreed action
Family A	12,000	9,400	11,000	2,100	-1,000	Add weekend shift week 3

How to use it

Gap = capacity + opening stock − max(forecast, firm orders).
Every negative gap leaves the meeting with an owner and a date, or it is accepted as a service risk in writing.
Carry last month's actions forward at the top of the sheet.

Download workbook & KPI template (PDF)

Quick quiz — check your understanding

1. A demand forecast is:
2. The Master Production Schedule (MPS) states:
3. A Bill of Materials (BOM) lists:
4. Capacity planning checks:
5. Overestimating demand usually causes:

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