Understanding Demand Net Variance

Net variance is the percent variation between current and previous order quantities for an item. You can specify net variance information at the item or customer level and use it to prepare for unexpected demand changes. For example, you can specify whether to alert a supplier if requirements change significantly as the supplier's ship date approaches, regardless of whether the change is an increase or decrease in order quantities.

You set up how the system processes net variances on the Net Variance tab in the Demand Maintenance (P40R10) processing options. You specify how the system processes these types of information:

• Tolerance level

• Notification level

• Critical indicator

When you set up net variance, you determine net variance days from the requested ship date, demand period, and demand processing type. This information helps you determine when the variance is considered significant and whether to issue a notification. For example, if the net variance setting is greater than the tolerance level, the system considers this difference as a significant change and displays net variance and critical ID information on the Work with Demand Detail form and on the Shipment tab on the Demand Detail Revisions form.

If the net variance setting is greater than the notification level, the system can send a notification message to an address book to alert you of the change. You can use the critical indicator to attach a ranking significance to the percentage amount.