Demand forecasting tools turn purchasing managers into inventory control experts. Using powerful forecast algorithms, easy-to-use exception management, and intuitive purchasing screens; this demand management toolkit guides you to increasingly better inventory performance. More turns, minimized overstock, and true control over multi-location distribution center and branches. By utilizing these tools you can expect:
- Outstanding order fill rates
- Increased inventory turns
- Improved GMROI
See the results in year-over-year profit and cash-flow improvement.
You can set Forecasting options from the Purchasing > Forecast menu. An overview of each feature is provided below along with links for more detailed instructions.
Reorder Quantity (ROQ)
The goal of demand planning is to establish an accurate Reorder Quantity (ROQ) which ultimately drives suggested purchase quantities. The tools outlined below play a role in this ROQ establishment. It is recommended to use these tools in the beginning of each new month, allowing you to make demand corrections early, before they have a chance to skew suggested purchase quantities.
We evaluate product demand against 8 different Forecast Formulas, and automatically assign the best predictive forecast formula to every Recurring item, for each warehouse. This process calculates each formula against the last three completed months of demand, and then selects the output that came closest to the actual product usage. Half of the formulas are intended for Seasonal products, though non-seasonal items may be assigned a Seasonal formula.
Since this process evaluates completed months of demand, it is best to run the assignment at the beginning of each month to get the latest and most accurate results.
The Purchasing section of the Product Master allows you to manually set your own formulas if you choose to do so.
For more information, see Automatically assign the forecast formula
Identification and correction of Unusual Demand is essential for intelligent purchasing forecasts. Such items fall outside of the system forecast for a given month. For example, a product that on average sells between 10-15 units per month, would have unusually high demand if a customer purchased 50 units. To identify these items, an acceptable range (based on Product Ranking) is established. If product demand falls below or above this range, the product is considered unusual. This screen allows you to adjust the demand levels back to more appropriate values. Related customer purchases are presented, along with a suggested correction and inventory value impact.
This screen should be used on either a daily or weekly basis for best results. The goal is to correct as many items as possible as they happen so they don't have a chance to skew your projections.
This screen will identify items that have unusual demand in any of the past twelve completed months. Therefore, the first time you review it you can expect to see a lot of products. By reviewing these on a continual basis you can ensure that a smaller, more manageable number of items will presented.
The Forecast Formula on the product is used to calculate what the expected usage was for a particular month. This is offered as a suggestion but for best results it's always better to manually review the demand of each item.
For more information, see Identify and adjust reorder quantities for products with unusual demand.
Sporadic Demand consists of active products that sell infrequently or intermittently. As such, these products can be difficult to forecast using predictive methodologies (which are used for Recurring products). This screen allows you to set maximum stock quantities based on the historical mode or median average demand. Similar to Unusual Demand, related customer purchases are presented, along with the expected inventory value impact. This will help ensure enough inventory is available for most customer orders, without stocking excessive inventory quantities. Since product demand changes over time, these maximum stock quantities will expire, allowing you to re-evaluate them with more current demand at a later date.
Once per month is recommended for best results. Keep in mind that Projected P/O will utilize the Suggested Maximum if no Max Stock Qty has been set for the product (which makes this process optional).
On average you can expect 70 to 90 percent of your stock products to be considered sporadic. As you set Max Stock Qty's, this list will gradually be reduced, though over time items will reappear once their Max Stock Qty expires.
Both the historical mode and median average demand from the past completed twelve months are calculated. The higher of the two figures then becomes the recommended Max Stock Qty.
For more information, see Adjust reorder quantities for products with sporadic demand.
The Projected P/O provides a vendor purchase summary that works in real-time, allowing quick response to customer demand as it is occurring. This summary continually updates recommended PO value, including carrying costs for purchases not meeting vendor minimums. In addition to building purchase orders, this screen also allows for Stock Transfer creation, balancing inventory levels between warehouses (and re-calculating the recommended purchase quantity in the process). Optionally, the vendor summary can be filtered to only display vendors where Critical purchases are necessary.
Purchase quantities are based on the Reorder Quantity (ROQ). Hover over the purchase quantity for a breakdown of the results.
Vendors must have Turn Cycles & Lead Time Days, assigned on the Purchasing tab of the Vendor Master.
There are numerous reasons a product may not appear in the projection results. Most commonly the product is either new or non-stock. Use the Overview tab on the Product Analysis to determine why a product is being excluded. Hover over the No P/O Proj field and the specific reason will be detailed.
The Forecast Parameters allow for fine-tuning, providing full control over forecast results. This includes settings that determine the acceptable range (for Unusual products), the expiration date of Max Stock Qty's (for Sporadic products), and minimum requirements a product must meet to be included in Projected P/O. By default, these parameters are set with recommended values.
Rarely. It is best to review the parameters at least once to obtain a better understanding of projection results. Making changes is only advisable if you are unsatisfied with the forecast results.
Changes go into effect instantly, however a products Reorder Quantity needs to be re-indexed for purchase recommendations to be updated. This process occurs weekly automatically, however it can be run manually if need be (manually running this process may take a considerable amount of time to complete).