Automated Purchasing Process

Forecast Calculation Code and Demand (PO07 & IC45/C2)

A key concept in understanding the automated purchasing process is understanding how the ‘weightings’ set up for each Forecast Calculation code in Maintain Forecast Calc. Code (PO07) relate to the demand statistics for each Product in Display Product Availability (IC45/C2).

  • The weightings are applied to the demand in IC45/C2 to determine the forecast for the next period.

  • IC45/C2 is populated with new periods of demand by Close Sales Fiscal Period (SA89). In other words, SA89 rolls the demand forward to the next period.

  • Here are the demand statistics for a seasonal product, BAS002, from IC45/C2:

  • When forecasting for a seasonal Product, it is common to base the forecast for a specific month on the demand for that Product from the same month of the previous year. Here is an example of a Forecast Calculation that will be applied to seasonal Products:

  • How does the forecast calculation work with the existing demand to calculate a forecast for the seasonal product, BAS002?

    • The Forecast Calculation ‘SEA’ has a weighting of 2.00 for Month 11, and a weighting of 1.00 for Months 10 and 12. What does this mean? It means that Month 11 is 2 times as important as every other month and Months 10 and 12 are 1 time more important than the other months. The remaining months do not count towards the forecast calculation (i.e. months with a value of zero are ignored by the forecast calculation).

    • What does all of this tell us in practical terms? From the PO07 screen capture, the system date is October 1st. Let’s assume that we are forecasting demand for the next month, which is November. This forecast is based on an historical model for forecasting demand – meaning that demand for a specific month is based on the demand for that Product from the same month of the previous year. The PO07 weighting table is set up to look back at our demand for the same period one year ago and apply the weighting listed for that ‘month’ to the demand.

    • From the IC45/C2 screen capture, September is the most recent period of demand. We know that we want to forecast demand for November of this year based on the demand from November of the previous year. If September is Month 1 in IC45/C2, then November is Month 11 in IC45/C2.

    • The PO07 ‘model’ or weighting table for the Historical demand calculation has a weighting of 2.0 assigned to Month 11, which is November of the previous year.

    • When PO25 runs, it will apply a weighting of 2.0 to November of the previous year in its calculation of the new forecast figure for November.

  • Once the Forecast figure is determined, it is used in the recalculation of Purchasing Criteria or Lead-Times in PO25.

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