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Chapter 4
inventory levels are inputs to this process. At first glance, it might seem that
a company should just make products to match forecasted sales, but
developing the production plan is often more complicated than that because
capacity must be considered. Many products have seasonal demand, and to
meet demand during peak periods, production planners must decide whether
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to build up inventory levels before the peak demand, increase capacity
during the peak period, subcontract production, or use some combination of
these approaches.
• In the Demand management step, the production plan is broken down into
smaller time units, such as weekly or even daily production figures, to meet
demand for individual products.
• The Materials requirements planning (MRP) process determines the amount
and timing of raw material orders. This process answers the questions:
“What raw materials should we be ordering so we can meet a particular level
of production?” and “When should we order these materials?”
• In the Purchasing step, the quantity and timing information from the MRP
process is used to create raw materials purchase orders, which are
transmitted to qualified suppliers.
• The Detailed scheduling process uses the production plans developed during
the demand management step as an input for a production schedule. The
detailed scheduling method used depends on the manufacturing
environment. For Fitter, the detailed production schedule will determine
when the production line will switch between the NRG-A and NRG-B bars.
• The Production process uses the detailed schedule to manage daily
operations, answering the questions: “What should we be producing?” and
“What staffing do we need to produce those products?”
Let’s take a more detailed look at each of these steps in the production process.

Sales Forecasting
Currently, Fitter Snacker has no formal way of developing a sales forecast and sharing it
with Production. SAP’s ERP system would allow it to take an integrated approach to sales
forecasting. Whenever a sale is recorded in SAP’s ERP Sales and Distribution (SD) module,
the quantity sold is recorded as a consumption value for that material. These consumption
values can be updated on a weekly or monthly basis, as desired. If more detail is needed,
the Logistics Information system that is part of SAP ERP can record sales with more detail
(for example, by region or sales office), or data can be stored in the separate Business
Warehouse (BW) system for more detailed analysis. With an integrated information
system, accurate historical sales data are available for forecasting.
A range of forecasting techniques can be used to predict consumer demand. One
simple forecasting technique is to use a prior period’s sales and then adjust those figures
for current conditions. To make a forecast for Fitter, we can use the previous year’s
sales data in combination with information on this year’s marketing initiatives to predict
future sales. Look at the forecasts that were created for January through June, shown
in Figure 4-3.

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