SAP SCM - Demand Management

Demand management is used to forecast, manage, and plan the demands of goods and has defined set of processes and capabilities to produce goods.

The key features of Demand Management are −

• This component is used to improve the demand planning by utilizing promotions.

• Based on historical sales data, you can handle demand for every store, product from different customers and hence you can see customer responses as per change in pricing policies, and profit for a particular product in the organization.

• You use demand models to predict consumers’ reaction with price change. As per organization goals like- increase profit, revenue, etc. you can define selling strategies for the products.

In SAP PP system, demand management is performed by Planned Independent requirement PIR. Planned Independent Requirement provides input for production planning. A PIR contains one planned quantity of product and one date for material or a Planned quantity is split over a span of time period.

To set your PIR version active use value 00 to specify requirement would be considered in material requirement planning. To maintain number of versions of planned independent requirement, you can set some numbers to active and others to inactive.

PIRs define the planning strategy in material master, which determines planning methods- make to order and make to stock.

In Make-to-Stock environment, PIRs are used where stock is built based on the forecast and not on sales order.

Planning Strategies

Planning strategies are divided into two categories −

Make to Stock Planning strategy (MTS)

This is planning strategy where stock is produced without sales order. It is used to meet the customer demands in future.

When you use Planning strategy 10, only PIR quantity is considered for MRP run and sales order are completely ignored. In this PIR requirement type LSF is reduced when you deliver stock to customer.

When you use Planning strategy 40, for MRP run maximum of 2 PIR and Sales order can be considered and PIR is reduced when enter the Sales order. PIR requirement type is VSF in this case.

Make to Order Planning strategy (MTO)

In this planning strategy, finished products are not produced until you receive sales order from a customer. For MRP run, you only consider Sales order.

In MTO strategy, you only produce sales order stock and products are delivered as per sales orders from specific customer.

You use Planning strategy 20 for make to order MTO process and planning strategy 25 is used to produce product variants when there is request for variant products from customer.