Average Demand

CIOP is an end-to-end supply chain training and certification program designed and developed by supply chain practitioners and consultants. The syllabus was developed in consultation with the industry, which led to Inventory Management Body of Knowledge (IMBoK v3.0). Most of the class discussions you will hear cannot be found in any textbook rather these are all the original contribution from the developers of CIOP. For example, think about the types of inventories such as raw material, work-in-process and finished goods. Out of these three, WIP is the most difficult to sell in the market and that is one of the reasons, WIP should be controlled well. The company has a built-in capability and capacity to sell finished goods, which is their business. The second easy to sell are the raw materials as you know the suppliers, who may either buy-back or at least guide you. But in case of WIP, this is custom manufactured to suit your manufacturing processes and may not well fit any other organisation, hence you may have to sell it as a scrap.

The number of goods in inventory and available inventory will affect the production and costs of the goods in inventory. To maximize the productive potential of the raw materials, energy, and capital stock or to adjust for changes in the volume of goods supplied, companies must carefully consider both the long-term and the short-term average demand for their goods in 

inventory and assess the effect of anticipated increases in demand on supply. By properly predicting the supply-demand curve, companies are better prepared to respond quickly to changes in the balance of supply with supply-demand changes in the industry. This will enable them to respond nimbly to changes in market conditions that may result in a sudden tightening or loosening of their inventory provisions.

A typical warehouse inventory computer system employs a two-step process to produce an accurate inventory supply forecast. The first step in this process involves the generation of the initial average demand forecast using data from the past. The second step is performed by computing the difference between the initial forecast and the actual current demand for inventory within the warehouse. The third step of the process is the allocation of the surplus inventory among replacement goods that are not needed at the moment, or are not used at the moment in the foreseeable future. These three steps, collectively known as the demand forecasting process, are carried out periodically throughout the year and may be periodically revised as needed to take into account changes in the quantity of goods in inventory and the amount of available inventory. The process is normally performed by manually tabulating the inventory on a daily basis or using an automated inventory controller.

Most warehousing managers make use of a technique called additive manufacturing estimation or additive manufacture. This technique is based on the assumption that, since most new products introduced into the market to arrive late in the day, there is a fairly strong probability that a large part of the product forecast inaccuracies will occur during the period just before the product arrives. Accordingly, these estimates are made by allowing a few days for the product to be "taken apart" and cleaned, inspected and washed (which may include a few minor flaws), before being put back on the shelves for sale. The estimated average demand accuracy thus becomes a measure of forecast accuracy in the timescale of the actual delivery of the product to the end users. In short, add on manufacturing estimates are derived using this process.

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