Aggregate Demand

TermiKnowledge - Supply Chain, Procurement and Inventory Terminologies
View All

CIOP training and certification program is delivered over 90 hours of classroom/online training in corporate and retail batches. The uniqueness of this program is that it addresses the modern supply chain trends without loosing the traditional aspects. This program prepares the participants for supply chain management in 2025 and beyond by infusing the learnings need in the areas of industry 4.0 such as Internet of Things (IoT), Blockchain, Artificial Intelligence (AI), Machine Learning (M/L) and Robotic Process Automation (RPA). It also deals with process improvement philosophies, methods, and tools such as Microsoft Visio. The program deals with almost 50+ supply chain analysis techniques.


First introduced in the manufacturing-based inventory framework in managing and predicting the demand for a product, aggregate demand is a statistical theory that suggests that variation in demand across locations, over time or over products is reduced when one can aggregate demand across units, for instance, across items, across commodities or over time. 

For example, suppose you are a manufacturer that manufactures shoes and needs an adequate number of them to fulfill all the orders that have been placed for the month. Assume that you can obtain all the shoes that you need from your plant located in New York City, while the demand for those shoes is high in Los Angeles. Now, if you want to use the "aggregates" approach to assess the demand for shoes in Los Angeles and the demand for those shoes in New York, you must make some local adjustments to your initial analysis.

The fact is, the demand in both locations is going to be very similar, and the error made in aggregating demand will bias the final value of the inventory calculation. Aggregates are only one of several approaches that are used to determine the location-demand relationship in the case of manufacturing and inventory applications. Another commonly used approach is the direct cost approach, which is based on a production function that is based on location. While locations do influence the costs of production, they are minor in many cases, and it is not necessary to consider them in inventory or demand measurement methods.

Aggregate Demand is just one of several Warehouse Management Components (WDCS) that are designed to improve overall warehousing performance. Other components include Cartograze Management System (CMS), which is used to create and track warehousing activities, such as stocks, stock levels, pick and place data, stock changes and others, as well as the ability to store data and work with legacy systems and software. By combining these various tools and improving chain management, warehouses can achieve efficiency and reduce their total cost of ownership.

Certified Inventory Optimization Professional 

CIOP is an end-to-end supply chain certification that contains 30 modules such as Introduction to Supply Chain Management, All About Inventory, Production Planning System, Strategic Business Planning, Sales & Operations Planning, Master Scheduling, Material Requirements Planning, Demand Management, Capacity Management, Forecasting, Production Activity Control, Procurement, Order Quantities, Independent Demand Ordering Systems, Warehouse Management, Transportation Management, Supplier Relationship Management (SRM), Customer Relationship Management (CRM), Introduction to Quality, Introduction to Packaging, Introduction to Process, Lean, Six Sigma, Total Quality Management, Theory of Constraints, Supply Chain Technologies, Supply Chain Techniques, Industry 4.0, International Standards and Supply Chain Risk, Safety and Security. 

Learn More

CIOP Knowledge Series

One-Minute Supply Chain Facts

The most recent video is available here. To access the past videos in the One-Minute Supply Chain Facts Series, please click the playlist icon located on the Top-Right of the video.





Do you want more information on Certified Inventory Optimization Professional?

Fill in the form to download the quote.