Demand forecast vs firm purchase order
Agree which document authorises spending or production, which quantities are firm, and how later releases become commitments. Define the frozen period, stock ownership and cancellation exposure, then confirm changes with the supplier in writing. Bring that brief to Cambridge China Bridge.
Separate planning information from authority to spend
Use a demand forecast to share expected demand, with its assumptions and revision date. Agree explicitly whether it authorises any capacity reservation, material purchasing or production. Label planning quantities separately from firm quantities; do not rely on the document title alone. Ask the supplier to explain what action it intends to take when it receives each update.
For a firm purchase commitment, record the product, approved specification, quantity, price, delivery requirement and supplier acceptance. Check for separate commitments to reserve capacity or buy materials even where finished goods remain forecast only. Put these boundaries into the agreed order terms; the factory negotiation guide covers the wider commercial discussion.
Define what each release authorises
A release schedule should identify the product and specification revision, quantity, required date, delivery location and status of each line. Say whether the date means production completion, dispatch or arrival. Agree who may issue a release, how the supplier acknowledges it, and which document takes priority if a purchase order and schedule conflict. For changes in the acknowledgement, see our guide to order acknowledgement discrepancies.
Distinguish a release that creates a purchase commitment from an instruction to dispatch goods already purchased. Agree whether forecast quantities become firm automatically as dates approach or require explicit approval. Keep the accepted schedule alongside the forecast so a replacement spreadsheet cannot quietly overwrite an existing commitment. Use the lead-time planning guide to build realistic delivery dates.
Make the frozen period specific
Define the frozen period as the part of the schedule where changes require supplier agreement under specified terms. Write down its start and end, how it moves with each update, and whether it freezes quantity, specification, delivery date or all of these. Avoid a phrase such as “firm near-term demand” without explaining what it covers.
Set separate authority for long-lead materials outside the frozen period. Agree the permitted purchasing scope, spending limit, reporting evidence and treatment of unused materials. Ask what can still change outside the frozen period and what costs may remain. A flexible delivery date should not be mistaken for permission to cancel materials already authorised.
Record ownership and unwanted-stock exposure
For raw materials, work in progress and finished goods, ask who owns the stock, who pays for it, who stores it and who carries loss or damage costs at each stage. Record the agreed ownership trigger separately from payment and dispatch instructions. Request batch identification, stock records and evidence that stock allocated to you can be located.
Agree what happens if demand falls, a product changes or the arrangement ends: continued storage, later delivery, rework, resale or disposal. Define how the supplier demonstrates committed costs and credits recoverable value, and who approves any settlement. Before accepting an excess-stock claim, compare it with authorised releases, material approvals and the latest physical stock report.
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Agree changes and reconcile the records
Treat a requested change as pending until the supplier confirms the revised quantity, specification, dates and cost consequences through the agreed process. Keep the previous accepted release, the change request and the acceptance together. Identify which lines are replaced and which remain in force. Tell purchasing, production planning and finance which version to use.
Review forecast demand, accepted releases, shipments and remaining stock together before issuing the next update. Resolve discrepancies and record the owner of each action. If releases may move to another factory, check existing material and stock exposure before switching; the supplier qualification guide covers approving the replacement source.
Frequently asked questions
Does sending a forecast authorise the factory to make goods?
Agree this explicitly before sending it. Mark planning quantities and state whether any material purchasing, capacity reservation or production is authorised. Ask the supplier to confirm its understanding.
What should a frozen period cover?
Specify its boundaries, how it moves with updates, and whether quantities, specifications and dates are fixed. Agree the approval process and cost treatment for exceptions.
Who owns stock held at the supplier?
Check the agreed ownership terms for materials, work in progress and finished goods. Record the ownership trigger, stock identification, payment arrangements and responsibility for loss or damage.
Can I reduce a call-off after the supplier accepts it?
Request the change through the agreed process. Obtain confirmation of the revised quantity, dates and cost consequences, then update the accepted schedule and stock exposure record.