Consumption Based Planning and Demand Management

Flashcards covering key terms and definitions related to Consumption Based Planning and Demand Management.

Consumption Based Planning (CBP)

A procedure within Material Requirements Planning (MRP) for which replenishment planning is based on the consumption of inventory.

Re-Order Point (ROP)

Demand During Replenishment Lead Time + Safety Stock.

Safety Stock (SS)

A quantity of stock held to satisfy unexpectedly high requirements during the stocking-up period.

Replenishment Lead Time (RLT)

Total time from order placement to availability, including purchasing processing time, planned delivery time, and goods receipt processing time.

Mean Absolute Deviation (MAD)

A measure of forecast accuracy; on average, how much the forecast will be inaccurate by.

Push Strategy

Push inventory in anticipation of actual demand; typically used by retailers.

Pull Strategy

Wait until demand is known and then push inventory to the customer; typically used by defense manufacturers.

Forecast Consumption (Forecast Netting)

The process of adjusting forecasts automatically to reflect actual customer orders.

Bill of Materials (BOM)

A listing of all raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product.

Net Requirements

Requirements after subtracting on-hand inventory and scheduled receipts.

Lot Sizing

A technique that determines the quantity to be produced or procured, considering trade-offs between excess inventory costs and economies of scale.

Purchase Order

A document generated by the purchasing department; an official order requesting goods and services from a vendor.

Production Order

Defines which material is to be processed, at which location, at what time, and how order costs are to be settled.

S&OP (Sales & Operations Planning)

A process including sales forecasting, demand planning, and supply planning to improve cash-to-cash cycle time and service levels.

Service Level (SL)

The desired probability of not having a stockout.

Absolute Safety Stock

Always carry an extra fixed quantity to cover uncertainties.

Seasonality

Demand that varies predictably based on time of year or season.

Dynamic Demand

Erratic demand influenced by factors like local regulations or natural disasters.

Inventory Records

Include information on the status of each item by time period, including gross requirements and scheduled receipts.

Master Production Schedule (MPS)

A time-phased plan specifying timing and quantity of production for each end item.

Exponential Smoothing

A forecasting technique that smooths variations in data based on previous observations.