The system uses the process of forecasting to predict how much of a product customers will purchase in the future based on past sales. Forecasting requires you to define parameters for a product or a period of time which the system uses to make these forecasting predictions. The system also must filter demand to create an accurate forecast picture. This filtering requires considering exceptional sales, lost sales, and trend, such as water heaters that are seasonal products and normally sold in the winter months.
Forecasting must also take into account the hits of a product, safety days, order points, line points defined and the economic order quantity (EOQ). The Update Demand Forecast program provides information necessary about how often a product sells per day or the average number of units sold per day. The system uses these demand calculations for the Suggested Purchase Order Queue, Suggested Auto Transfer, and Product Ranking programs.
These values determine the amount of inventory to stock in your warehouse. In a multiple-branch warehouse company, these values also determine the amount of inventory to transfer to branches.
Before the system calculates order points, line points, and EOQ, it needs a "clean" demand sample. That is, as accurate an estimation of demand as possible, despite the unpredictability of the future. To help clarify demand, the system gives you the ability to:
Use variable forecasting periods.
Eliminate exceptional sales.
Compensate for lost sales and exceptional sales.
Consider trends in demand.
Forecast parameters exist at the branch, buy line, and product levels, providing broad to detailed control over your inventory.
See Also:
Entering Forecast Parameters for Products