JDEtips 4On Manufacturing
JD Edwards Materials Planning, Demand Rules,
Page 1
November/December 2006 Volume VII Issue 6
and Forecast Consumption
Editor’s Note: You make ‘em,
they consume ‘em—that’s how the
mighty world of business goes round.
Understanding supply vs. demand
is an art unto itself. There’s no real
easy way to determine how much
product to make to satisfy custom-
ers’ needs and avoid critical back-
logs, without overstocking the ware-
houses. JD Edwards software allows
for forecasting, but the question of
which methods to use, when to use
them and how to use them often
eludes us. Terry Horner has some
great thoughts on how to calculate
and forecast demand that will hope-
fully set you on the right track. . . or
at least one that is easier than trying
to “guesstimate” how much product
you’ll need to plan for.
Abstract
This article is intended for compan-
ies using JD Edwards for the plan-
ning processes of sales forecasting,
DRP, MPS, and MRP. In this article,
we’ll define the term “Forecast Con-
sumption” and provide examples.
We’ll also define and discuss the
JDEtips Journal
standard JD Edwards planning time
fence codes and rules, and compare
and contrast different techniques for
demand calculations.
Also covered is the importance
of properly using demand rules in
materials planning. We also review
the relationship between different
industry demand patterns, and the
appropriate selection of demand rules
that should be used for planning.
The techniques reviewed in this
article apply to both the Enterprise
One® and World® versions of JD
Edwards software.
Forecasts of future,
not yet realized,
demand must be
a part of our MRP
planning system.
Background: Why Are
Demand Calculation Rules
Important?
In my experience working with
companies in the implementation
and management of manufactur-
ing planning software applications,
one of the least understood areas is
that of demand calculation rules and
“forecast consumption”. Sales fore-
casting is required any time a com-
pany has a cumulative manufactur-
ing and purchasing lead-time that
exceeds the amount of time custom-
ers are willing to wait for delivery of
the product from the time the order
is placed.
In order to ensure that there will
be product in stock when a customer
order is taken, the company must
have already purchased the required
material and manufactured the
product. In order to make sure that
MRP properly plans these logistical
activities in sufficient time, before
JDEtips.com
By Terry Horner
the customer order is booked, a fore-
cast quantity must be entered into
the planning system. If the customers
were willing to wait for the product’s
cumulative lead-time, we could have
simply let the order demand drive all
of the planning activities.
Unfortunately, if we cannot ship
the product quickly enough, custom-
ers will simply go down the street to
one of our competitors and buy the
product. So forecasts of future, not
yet realized, demand must be a part
of our MRP planning system.
You may be saying “Yes, yes,…
but you still have not answered the
question: Why are demand calcula-
tion rules and forecast consumption
important?”
Logic for demand calculations and
forecast consumption are important
for companies with MRP systems
that consider both customer order
demand, from firm sales orders, and
forecast quantities. The degree of
importance is larger as the volume
of future dated sales order “backlog”
increases (as we will see later).
If the logic used for forecast con-
sumption is not realistic for your
company’s demand pattern, then
invalid, erroneous demand figures
will be calculated by MRP, and this
will cause equally invalid and errone-
ous MRP messages. As a result, plan-
ners will find themselves chronically
“second guessing” their MRP mes-
sages. Another symptom of invalid
demand calculation logic is “nervous
MRP”. Instead of smoothly consum-
ing forecast demand, some rules may
cause lumpy, spiky demand values
that vanish almost as fast as they are
created.
JDEtips © 2006 Klee Associates, Inc.
 JDEtips 4On Manufacturing
Page 2
November/December 2006 Volume VII Issue 6
Many of my clients have struggled
with setting up the best JD Edwards
demand calculation codes for their
environment. One word of warning:
There is no perfect demand calcu-
lation technique for any company.
Every rule has risks, and by their
very nature, forecasts are almost
always wrong (often by a massive
amount). However, by selecting a
reasonable rule, you can help to
establish a more reliable and stable
planning system.
JD Edwards Time Fences
In JD Edwards, there are three dif-
ferent time fences used for materials
planning. These time fence values
are defined in the Item Branch/Plant
records:
1. Planning Fence
2. Freeze Fence
3. Message Display Fence
Only the “planning fence” will be
addressed in this article. The “freeze
fence” provides for the suppression
of MRP messages when the mes-
sage date is within the freeze fence
number of days from today. The
“message display fence” controls
how many days into the future MRP
action messages will be generated for
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the item.
The “planning fence” in JD
Edwards is actually misnamed,
and is different than the definition
according to APICS. APICS defines
it as:
Planning Time Fence – A point in
time denoted in the planning hori-
zon of the master scheduling process
that marks a boundary inside of
which changes to the schedule may
adversely affect component sched-
ules, capacity plans, customer deliv-
eries, and cost. Planned orders out-
side the planning time fence can be
changed by system planning logic.
Changes inside the planning time
fence must be manually changed by
the master scheduler. - APICS Dic-
tionary, 10th ed.
This is not how JD Edwards MRP
uses this value. In standard JD
Edwards, there really is no “planning
time fence” according to the APICS
definition. (The closest thing may be
the “message display fence.”)
A better description of the “plan-
ning fence” in JD Edwards would be
what APICS defines as the “demand
time fence”. APICS defines it as:
Demand Time Fence (DTF) – That
point in time inside of which the
forecast is no longer included in
total demand and projected avail-
able inventory calculations; inside
this point, only customer orders are
considered. Beyond this point, total
demand is a combination of actual
orders and forecasts, depending on
the forecast consumption technique
chosen. - APICS Dictionary, 10th
ed.
In JD Edwards, the planning fence
days defines two zones of time for the
item. In the zone less than the plan-
ning fence days, one rule is used to
perform your demand calculation.
In JD Edwards, the
planning fence days
defines two zones of
time for the item.
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Outside of the planning fence days, a
different rule is used. The code that
defines the two rules to be used is
called the “planning fence rule”. (As
we will see later, the APICS defini-
tion of Demand Time Fence is exact-
ly the case in JD Edwards if we use a
“planning fence rule” of “C”).
Sources of Demand in JD
Edwards
In JD Edwards, demand that is
considered by MRP can come from
several different sources:
• Customer sales orders
• Forecasts
• Transfer orders (DRP)
• Work orders
• Planned work orders
• Safety stock
• Other demand
Work order and planned work order
demands only exist for “dependent
demand”--the component and sub-
assembly items that are structured
in the bills of material for higher
level items, based on manufacturing
schedules under the control of the
company.
The “planning fence rule” in JD
Edwards has no affect on dependent
demand. It only affects the calcu-
lated demand from customer sales
orders and forecasts.
The Backlog Curve
Both customer sales order demand
and forecast demand are consid-
ered “independent demand”, that is,
demand from outside the direct con-
trol of the company such as requests
for end products, etc. However, it usu-
ally doesn’t make sense to add these
two demand types together. Why??
Because the forecast is an estimate of
JDEtips © 2006 Klee Associates, Inc.
Knowledge
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