Demand forecasting is an important feature of successful businesses as it aims to provide an accurate prediction of the demand, and schedule production accordingly to always have supplies to meet the demands. Forecasts represent the projected demands for a specific item and are not reflective of actual firm demands.
Accurate demand forecasting allows companies to be more efficient in their resource allocation and inventory management to minimize waste, inventory carrying costs, and delays. In addition, forecasting helps businesses track their sales, control their production cost, and track the overall performance of the manufacturing process.
The Forecasts View inside the Inventory Plan displays forecasts for selected inventory items. Users can generate new forecasts, adjust existing forecasts, and remove them from the plan using this tool.
Accessing the Forecasts view
Forecasts view allows you to view, generate, and adjust forecasts. To access the view:
- Select one or more inventory items from the inventory plan.
- Click on the Forecasts tab to view the forecasts view.
Generating Forecasts Options
To generate forecasts, select one or more inventories in the Inventory plan and click on the Generate button of the Forecasts view.
This will open the Forecast Generator dialog where the following parameters can be specified:
- Forecast Interval: This specifies the time interval between each generated forecast (i.e. Quarter, Month, Week, Day).
- Number of Intervals to forecasts: This tells PlanetTogether how many forecasts to generate.
- First Interval Date: Specifies the date of the first forecast to be generated.
- Type of Forecast: Specifies how quantities for each forecast are calculated. Two types are available:
- Manual: This type of forecasting is used when sales orders are not available in PlanetTogether. Multiple forecasts can be created at once by specifying the quantity for the first forecast and defining how to calculate the quantity for the remaining forecasts being created. Subsequent quantities can either be equal to the first (all quantities are the same) or can increase or decrease by a percentage. For example, starting with a quantity of 10, you can choose to increase by 5% or even decrease by a quantity of 1.
- Automatic: With this type of forecasting, PlanetTogether generates forecasts based on sales order history. The "Number of sales history intervals" to be considered during forecast generation can be specified in this tab. For this method, PlanetTogether uses the Autoregressive integrated moving average (ARIMA) algorithm.
This option prompts PlanetTogether to automatically regenerate forecasts when sales orders are added, changed, or removed. This feature can be turned on for particular inventories by setting the following three properties in the "Warehouses and Inventory" tab of the Inventory Plan:
- Auto Generate Forecasts: When enabled, PlanetTogether auto-generates forecasts for this inventory when its sales orders are updated.
- Forecast Interval: Determines the interval of time between each forecasts generated (Quarter, Month, Week, Day) when auto-generating forecasts.
- Number of Intervals to Forecast: This tells PlanetTogether how many forecasts to generate.
Including Forecasts in Inventory Calculations
The forecast demand is displayed in the Inventory Adjustment pane of the inventory plan if the "Include Forecast in Net Inventory" box is checked from the Options drop-down menu of the Inventory.
Enabling this feature will add a "Forecast" row in the inventory adjustment pane:
Forecast consumption will reduce (consume) forecast demand as sales orders are entered to avoid duplicating demand. This is triggered as part of the MRP process. If Forecast Consumption is enabled, running MRP will cause forecasts to be consumed before the main MRP logic is executed. The following forecast consumption strategies can be chosen:
- Backward: This option will cause a search for forecasts with the same or earlier period. If no forecasts are found, no consumption occurs. If a forecast is found and its quantity is larger than the sales order quantity the system will consume the sales order quantity and stop looking for forecasts. If the forecast quantity is smaller than the sales order quantity, the system will consume the full forecast and will search for another forecast to consume. These steps are repeated until the sales order quantity is fully consumed or no eligible forecasts are found within the consumption window.
- Forward: This option follows the same steps as Backward forecast consumption, but the system looks for forecasts with periods equal to or greater than the sales order period are considered.
- BackwardThenForward: This option starts by following the backward strategy and switches to forward when no more backward forecasts are available and the sales order is not fully consumed.
- Spread: Finds the forecasts before and after the sales order, then calculates the ratio between the sales order and forecast. The forecast is consumed based on the ratio amounts. If the forecast quantity is less than the amount being consumed, the amount will go down to zero and the process is repeated with the next forecast.