Unconstrained Sales Forecast vs. Constrained Sales Forecast

When you start in sales and operation planning process start will be unconstrained forecast and constrained forecast will come out as by product.

Any unconstrained forecast must have no supply constraints imposed on it. This is ideal situation and where every company wants to be, however, in real world  is that supply constraints exist and must be considered.

Constrained forecast which incorporates all the known supply constraints like material availability , transportation time etc.  that exist for the company so that the product is a realistic picture of supply and demand and this can company can feasibly manage in terms of fulfilling orders.

Let’s take an example of any division wants to sale the material of 15k MT , but they are having 2k mt material with them so they ask another 17k MT from plant.

Unconstrained Scenario  

Demand  17 k = supply 17k

Constrained scenario

Demand 17 k = Supply 10 k – reason labour strike/ transportation late/plant shutdown

SOLUTION

1-   Company should increase their supply capacity

2-   Company should reduce the demand plan