Customer product forecasts
Standard, non-forecasted, usage in Distribution SX.e uses actual sales history for the previous 25 months to calculate usage and make purchasing recommendations for the next month. Standard usage expects future usage to correlate to historical usage and does not account for changes in your business that might result from securing new business and requiring increased inventory.
With customer forecasting, you can accommodate anticipated new business in addition to the actual usage for the previous 25 months and factor anticipated volume into purchasing recommendations for the next 12 months. When you use customer forecasting, the total forecast quantity to purchase for all active forecasts is included in the purchasing recommendations of the Purchase Entry Recommended Replenishment Action Report and the Transfer Entry Recommended Replenishment Action Report. Buyers can view the forecast quantity in Purchase Demand Center Entry and Transfer Demand Center Entry when reviewing line item details. For items with forecast quantity, buyers can access the Customer Forecast Details record for information about the forecast and quantities to help with purchasing decisions.
When you use customer forecasting, the total forecast quantity to order or transfer for all active Value Add (VA) forecasts is included in the replenishment recommendations of the VA Entry Recommended Replenishment Report. This forecast quantity is used to calculate the order point and line point for replenishment, and it displays on the report.
Creating forecasts
Forecasts are created in Product Customer Reservation/Forecast Setup. You can create product forecasts for a customer, ship to, or ship to group. Forecast by customer, ship to, or ship to group to specify and track forecast performance for a specific customer, ship to, or by a set of customer locations (a ship to group). You can use this feature to create forecasts that prompt purchasing inventory for the locations that require it.
A ship to group consists of multiple customer ship to addresses which you group together by assigning them to a group that you create in Customer Ship To Group Setup. For example, if a customer has a set of regional locations served by a specific warehouse, you can forecast demand by these regional groups using ship to groups to track usage and generate forecast quantities. Tracking usage by ship to group consolidates usage to allow inventory forecasting for the warehouse that serves the group.
To consider product lead times for products when calculating the impact of customer forecast usage on PO, WT, and VA replenishment recommendations, you can include the product's Average Lead Time when searching for active forecasts during the replenishment process. Select Include Lead Time in SA Administrator Options-Products-Replenishment to add the customer forecast product’s lead time to the current date when searching for active customer forecasts to include in the replenishment report. You can also specify a Ramp Up Days value to add that number of days to the calculated forecast date when searching for active forecasts where the calculated ramp-up date falls within the start and end forecast dates.
Updating forecasted usage
Forecasted usage is updated by the Product Administration Month End Processing Report. It uses the actual usage data recorded during invoice processing and forecast quantities from the Product Customer Reservation/Forecast Setup-Detail record.
This hierarchy is used to locate an active forecast record for the product:
- Is there an active forecast set up in Product Customer Reservation/Forecast Setup for the product?
- Is the ICET posting date within the forecast’s start and end dates, or
- If Record Usage Based on Requested Ship Date is selected in SA Administrator Options-Products-Defaults, is the sales order Requested Ship Date within the forecast's start and end dates?
- Is the Include Lead Time option selected in SA Administrator Options-Products-Replenishment?
- Is a value specified in the Ramp Up Days option in SA Administrator Options-Products-Replenishment?
- Was a ship to code specified on the order?
- Is there a Forecast-Ship To record that matches the customer number, ship to, usage warehouse, and usage product?
- Is the ship to address is assigned to a ship to group?
- Is there a Forecast-Ship To Group record that matches the customer number, ship to group, usage warehouse, and usage product?
- Is there a Forecast-Customer record that matches the customer number, usage warehouse, and usage product?
Calculating usage, demand, and forecasting
The non-forecasted usage rate is stored in Product Warehouse Product Setup. Actual usage data, forecasted and non-forecasted, is stored in Product Warehouse Product Setup. Forecasted usage data is stored in Customer Reservation/Forecast Setup-Detail. The non-forecasted usage rate is used to calculate the non-forecasted order point, line point, and other ordering controls. To calculate replenishment recommendations, forecast data is added to the non-forecasted ordering controls from Product Warehouse Product Setup.
When the product warehouse usage is calculated, the forecasted actual quantities from Customer Forecast Detail are used to determine the non-forecasted usage rate. The actual usage quantities for unexpired, active forecasts are subtracted from normal product warehouse usage. If the ordering controls require the past usage of expired forecasts to be included, the value in the Expired Forecast Usage field determines whether to subtract the actual usage from the normal usage.
You can specify a value in the Estimated Run Rate% field for the expected percent of forecast the customer will actually purchase. For example, if a customer agrees to buy 100 units of a product per month and there is an 80% chance of the order, then the estimated run rate % would be entered in the Forecast as 80%. If the customer only consumed 50 for one month, then the actual run rate is 50% and the buyer may choose to not buy the next month's quantity due to under-utilization, or low run rate.
At the same time, you can exceed the forecast when the run rate is exceeded. For example, a customer may contract to buy 1200 units of a product per year and request that 100 units of the product be available per month. One month a customer may purchase only 50, and another month the customer may purchase 150. The forecast and the run rate are reported to the buyer to aid purchasing decisions, but the actual customer forecast remains the same.
Forecasted usage is not calculated for warehouse products when the usage rate calculation is set up for the demand planning method. Purchase and transfer demand centers do not take account of customer forecasts because demand planning uses an external method to determine the quantity to order. When you use the Product Administration Demand Planning Report to extract replenishment data, note that the customer forecasts are not included to determine quantities. The external supplier must include any anticipated forecasted usage expectation in the quantity supplied.
In those situations where a product’s lead time extends into a new customer forecast, or extends beyond an existing forecast and no new forecasts exist, you can include the lead time days when searching for active forecasts in the replenishment process. This allows you to procure sufficient inventory in advance of a forecast period for products with a longer lead time.
If a value is specified in the Ramp Up Days field, an additional search is performed to find active ramp-up forecasts. These are forecasts where the calculated ramp-up date falls within the start and end forecasts dates. If the same customer/ship to/product is covered by a current forecast, the ramp-up forecast is not used. When calculating a ramp-up forecast, forecast quantities in the first period (1) of the forecast record through the current period are totaled, then the actual forecast quantities for the same periods are subtracted. This amount is then multiplied by the run rate percent.
When Include Lead Time is selected, the Product Line Setup Review Days are not used when determining the forecast quantity to use to increase the order point and line point used during the RRAR process.
If a forecast period ends before the next replenishment review, the lesser of the total quantity remaining on the entire forecast and the expected usage until the end of the forecast is used to determine the quantity to purchase.
If a forecast period ends after the next replenishment review, the lesser of the total quantity remaining and the expected usage during the replenishment review cycle is used.
Example 1: Usage rate calculation for unexpired forecast
In this example, usage rate is calculated for an active, unexpired forecast for the current month, February 2020, using the backward 3 method.
| Month | Normal Usage | Actual Quantity Customer 101, 12-month forecast started 07/10/2019 | Actual Quantity Customer 3000, 6-month forecast, start date 01/01/2020 |
|---|---|---|---|
| November | 10 | 3 | 5 |
| December | 22 | 6 | |
| January | 18 | 4 |
Standard calculation: (10 + 22 + 18) / 3 = 16.67
Non-forecasted calculation: (10 - 3 + 22 - 6 + 18 - 4 - 5) / 3 = 10.67
The non-forecast usage rate (10.67) displays in Product Warehouse Product Setup-Ordering, and other ordering controls are calculated using this amount. The total usage rate (16.67) displays in Product Warehouse Product Setup-Ordering and Product Inquiry-Replenishment.
Example 2: Current and expired forecast as normal usage
In this example, Normal is specified in the Expired Forecast Usage field in Product Customer Reservations/Forecasts Setup-General to include actual usage in the normal usage. The usage rate is calculated for an active, unexpired forecast for the current month (Feb. 2020) using the backward 3 method.
| Month | Normal Usage | Actual Quantity Customer 101, 12-month forecast started 01/01/2019 | Actual Quantity for current active forecast Customer 101, 12-month forecast, start date 01/01/2020 |
|---|---|---|---|
| November | 10 | 3 | 4 |
| December | 22 | 6 | |
| January | 18 |
Standard calculation: (10 + 22 + 18) / 3 = 16.67
Non-forecasted calculation: (10 + 22 + 18 - 4) / 3 = 15.33
The non-forecast usage rate (15.33) displays in Product Warehouse Product Setup-Ordering, and other ordering controls are calculated using this amount. The total usage rate (16.67) displays in Product Warehouse Product Setup-Ordering and Product Inquiry-Replenishment.
If Remove is specified in the Expired Forecast Usage field in Product Customer Reservations/Forecasts Setup-General, the actual forecasted usage is subtracted from normal usage as in Example 1.
Initial usage rate calculations
Usage data in Distribution SX.e for periods that precede your implementation of forecasting includes all sales usage. Because no forecast usage data exist, past forecasted usage is treated as if it were normal usage, which can result in overstated usage rate expectations. To prevent overstated usage results, you can run the Product Customer Reservation/Forecast Import Report to import your past forecast data.
Example 3: Usage rate calculation when Include Lead Time is selected
During RRAR processing, customer forecast records where the calculated forecast date falls between the forecast begin and end dates are selected. The calculated forecast date is also used to select the appropriate month within the customer forecast detail record. When the Include Lead Time option in SA Administrator Options-Products-Replenishment is selected, the Average Lead Time days in Product Warehouse Product Setup is added to the current date to determine the forecast dates.
If a value is specified in the Ramp Up Days, an additional search is performed during RRAR processing to search for active ramp-up forecasts. Ramp-up forecasts are found by adding the Ramp Up Days value to the adjusted forecast date. Forecasts where the ramp-up date falls within the begin and end forecast dates and the ramp-up forecast date falls in the first period of the forecast records are selected, if there is not an existing forecast record for the current system date for the same customer/ship to/product.
Include Lead Time = Yes
Ramp Up Days = 15
Lead Time = 14 days
Current Date: 12/4/20
Calculated ramp-up forecast date = 12/4/20 + 14 + 15 = 1/2/21
Calculated forecast date (without Ramp Up Days) = 12/4/20 + 14 = 12/18/20
Two customer forecast records qualify for selection during RRAR processing. However, the ramp-up forecast is excluded because the current, active 2020 forecast covers the forecast period (12).
Customer forecast record for current 2020 forecast:
Forecast period begin-end: 1/1/2020-12/31/20
Expected run rate: 90%
Monthly forecasts:
| 1 | 2 | 3 | 4 | 5 | 3 | 7 | 8 | 9 | 10 | 11 | 12 | Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 10 | 10 | 30 | 40 | 50 | 60 | 80 | 10 | 10 | 10 | 10 | 10 | 330 |
| 8 | 10 | 22 | 45 | 47 | 48 | 67 | 15 | 9 | 1 | 0 | 0 | 272 |
Customer forecast record for ramp-up 2021 forecast:
Forecast period begin-end: 1/1/2021-12/31/21
Expected run rate: 70%
Monthly forecasts:
| 1 | 2 | 3 | 4 | 5 | 3 | 7 | 8 | 9 | 10 | 11 | 12 | Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 10 | 10 | 30 | 40 | 50 | 60 | 80 | 10 | 10 | 10 | 10 | 10 | 330 |
| 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
During the replenishment process, the order point and line point are increased by adding the quantity to purchase that is calculated for the selected forecast. If the forecast period ends before the next purchase review period, the lesser of the total quantity remaining on the entire forecast or the expected usage between the current period and the end of the forecast is used.
If the forecast period ends after the next purchase review period, the lesser of the total quantity remaining or the expected usage during the replenishment review period.
If the lead time is changed to 90 days in this example, then the ramp-up forecast is used:
Include Lead Time = Yes
Ramp Up Days = 15
Lead Time = 90 days
Current Date: 12/15/20
Calculated ramp-up forecast date = 12/04/20 + 90 + 15 = 3/17/21
Calculated forecast date (without Ramp Up Days) = 12/4/20 + 90 = 3/3/20
The ramp-up forecast record is used in this case as there is no 2021 customer forecast record for the same customer/ship to/product. The quantity to purchase for ramp-up forecast is calculated first by adding forecast quantities from the beginning of the forecast period (1) through the period associated with the calculated ramp-up date, which is period 3 in our example. Then, the actual forecast quantities for this same period is subtracted from that sum. The result is multiplied by the run rate:
Quantity to Purchase = [(Forecast Periods 1-3) - (Actual forecast quantities 1-3)] * Run rate, or
35 = [(10 + 10 + 30) - (0 + 0 + 0) * 70%
The order point and line point values used by the PO and WT RRAR are increased by 35 for this forecast record.