The Prime purpose of an organization is to serve the customer. Marketing focuses on meeting customer needs, but operations, through material management must provide the resources. The coordination of plans by these two parties is Demand Management.

Demand Management is the function of recognizing and managing all demands for products. It occurs in the short, medium and long term. In the long term, demand projections are needed for strategic business planning of such things as facilities. In the medium term the purpose of demand management is to project aggregate demand for production planning. In the short run, demand management is needed for items and is associated with master production scheduling. Companies are most concerned with the latter.

If material and capacity resources are to be planned effectively, all sources of demand must be identified. These include domestic and foreign customers.

Demand Management include four major activities

i) Forecasting

ii) Order Processing

iii) Making Delivery promises

iv) Robust coordination between manufacturing planning and control and marketplace.

When historical data for demands are plotted against a time scale, they will show any shapes, or consistent pattern that exist. A pattern is the general shape of a time series. The actual demand may vary with forecasted demand due to the reasons for Trend, Season, Random Variation and Cycle.

Forecasting depends upon what is to be done. They must be made for strategic business plan. The strategic business plan is concerned with overall markets and the direction of the economy over the next two to ten years or more. Its purpose is to provide time to plan for those things that take long to change. For production the strategic business plan should provide sufficient time for resource planning, capacity expansion, capital equipment purchase. Forecast and planning will probably be reviewed quarterly or yearly.

Order Processing occurs when a customers order is received. The product may be delivered from finished goods inventory or it may be made or assembled to order. If goods are sold from inventory, a sales order is produced authorizing the goods to be shipped from inventory. If the product is made or assembled to order, the sales department must write up a Demand order specifying the product.