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Demand Terms

Every item has a unique set of demand characteristics.  Some of those characteristics can be represented mathematically including –

Annual Demand (AD),

Forecast Annual Demand (FAD),

Leadtime (L),

Leadtime Demand (LD),

Forecast Leadtime Demand (FLD),

Standard Deviation of Leadtime Demand (SDLD), and

Leadtime Forecast Error Percent (LFEP).

The annual demand (AD) for an item is the number of units requested for an item during a year.  It looks backward over the prior year and is strictly historical. The forecast annual demand (FAD) is the forecasted (or expected) annual number of units requested by customers over the upcoming twelve months.  The leadtime (L) for an item is the elapsed time from the placement of the replenishment order until the item is available to satisfy customer demand (Point 4 in the figure).  Leadtime demand (LD) is the historic number of units requested by customers during a leadtime (Point 5 in the figure).  The forecast leadtime demand (FLD) is the forecasted (or expected) number of units that will be requested by customers during a future leadtime.  The expected value of the forecast leadtime demand is the product of average leadtime in days  and average daily demand.

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