Demand propagation

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Demand propagation

The propagation method is important when computing the site demand profile. You have the following choices:

Demand Series propagation – This method is intended to provide a more robust demand propagation by handling all kinds of demand data such as extremely slow and extremely small.
Formula propagation – This method uses the statistically acceptable formula.

The following table provides a summary of the advantages and disadvantages of the two methods:

	Formula	Demand Series
Advantages	Only uses demand parameters. The running time is not related to the size of the demand series.	Robust and easy implementation. Handles extreme demands. No accumulated errors. More accurate results.
Disadvantages	Has difficulty handling extreme demands, such as Extremely Slow. Can experience numerical issues. Unreasonable demands. Accumulated errors, as formula based demand propagation yields more and more errors towards the upstream echelons. Complicated implementation.	Requires a demand series. The running time is dependent on the size of demand series.

Formula

Demand Series

Advantages

Only uses demand parameters.

The running time is not related to the size of the demand series.

Robust and easy implementation.

Handles extreme demands.

No accumulated errors.

More accurate results.

Disadvantages

Has difficulty handling extreme demands, such as Extremely Slow.

Can experience numerical issues.

Unreasonable demands.

Accumulated errors, as formula based demand propagation yields more and more errors towards the upstream echelons.

Complicated implementation.

Requires a demand series.

The running time is dependent on the size of demand series.

When there is extremely slow or extremely small demand data, demand series-based propagation will be able to complete demand propagation. However, if the demand does not meet minimum requirements, the demand statistics cannot be calculated and, as a result, safety stock will not be calculated in this case.

The assumptions behind the demand series method are the same as for the formula-based demand propagation. That is, each site is assumed to be operating with a continuous review (r, nQ) policy where r is the replenishment order point and Q is the replenishment quantity. n states that the policy can place multiples of q if a single Q is not sufficient for replenishment. Unlike the formula-based method, each demand series is propagated to upstream sites in the demand series-based demand propagation method. Once a demand series is propagated to a site, all the required demand statistics are calculated. This process repeats itself for upstream echelons, completing the demand propagation.

If you have selected Demand Series as the propagation method, this method will be used with the following conditions and exceptions:
- If the demand series data alone is available, Demand Analysis uses Demand Series propagation.
- If no data is available, Demand Analysis will not perform propagation.
- If there is User Defined Customer Forecast Profile data, Demand Analysis switches to formula-based demand propagation. This switch applies to upstream dependencies. For example, if the product with User Defined Customer Forecast Profile data is included in a BOM, all products used in the BOM switch to formula-based propagation.

Demand Series is the preferred type of propagation and is used as the default method.

You must have Inventory Policies defined for all facilities that are included in Demand Propagation.

Last modified: Wednesday May 15, 2024

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