To calculate daily demand for each product, the system does the following:Demand is how often a customer requests a product, whether that product is on the shelf ready to be sold, or whether it must be ordered and direct shipped from a vendor, or transferred in from another branch. To provide for the needs of your customers, you want to have enough product on the shelf. How much you purchase, and how often, often depends on how often a sold in the recent past.
The basic formula for calculating a product's demand per day is:
Total Demand in Forecast Period / Days in the Demand Period = Demand per Day
However, past performance is not always an accurate predictor of future sales. For this reason, the system uses different inventory control parameters as part of the demand calculation.
To calculate daily demand for each product, the system does the following:
Determine whether to do the demand calculation.
If the product status is Stock or NonStock, calculate demand.
Otherwise, do not calculate demand.
Determine whether product is seasonal or non-seasonal and whether to use product, buy line or system forecast parameters, and then determine the product's forecast period.
Within the product's forecast period, scan the sales and work order transactions, but not returns or transfers, for Stock and Tagged, not Direct, Overship, Exceptional or Review quantity types.
For each qualifying transaction, collect the:
Transaction date
Number of hits
Bill-To ID
Order quantity
Continue collecting data until the number of transactions reaches the minimum number of hits required for forecasting (as defined on the Forecast Parameters screen at the product, buy line or system level) or the end of the forecast period.
If the total number of hits collected is less than the minimum number of hits required for forecasting, check to see whether the product is set up to add the demand of other products to its demand. If so, repeat step 3 to gather the same information for the additional items.
If, after all sales transaction information has been gathered, the total hits is still less than the minimum hits requirement as defined in the Minimum Hits control maintenance record, then discontinue the demand calculation for this product.
Remove the exceptional sales, if they exist.
Sort the new transaction list by quantity and identify the order quantity of the median sale. That is, the quantity of the middle transaction in the data sample.
For a seasonal product with automatic trend enabled, adjust the demand according to the system-calculated trend percent.
If a lost sale percentage exists for the product, increase the demand to account for lost sales.
If it exists for a non-seasonal product, adjust the demand by the manual trend percent.
See Also:
Auditing the Demand Calculation