Forecasting and MRP

Forecasting in M3 may be introduced in the material plan to control the MRP and DRP. Controlling and implementing a forecast in the material plan is quite complex if you consider all the possibilities and parameters involved.

Before you implement the forecast, determine how often you will calculate the forecast and what your time fences are. When the forecast ends up in the material plan, the MRP/DRP can create planned orders responding to those demands.

Forecasting in the material plan

Forecasting in the material plan is coded as order category 010. As opposed to other transactions, the forecast transactions are not read from a file, but calculated on-line in (RPS950) as you open the material plan. Two factors have the greatest effect on the forecast in the material plan. They are:

The period frame set in 'Planning Policy. Open' (MMS037) is used to set the time buckets into which the forecast should be placed. The period frame is updated for each item in 'Item. Connect Warehouse' (MMS002). Due to the dynamic possibilities in creating time buckets, you may have anything from daily to yearly buckets. The quantity you have forecasted is always broken down to daily quantities and then added to the number of working days in the bucket. In the bucket, the position of the forecast quantity could be either in the beginning, middle or according to a point of time given by the transaction type.

The distribution point parameter in 'Forecast Logic. Open' (FCS305) determines where the forecast will end up. The forecast must be put on a defined delivery day in the system calendar. If the forecast quantity in the bucket belongs to a day that is not defined as a delivery day, it will be placed on the previous defined delivery day as a separate record.

If the forecast quantity is not divisible in even units for the days, and the number of decimals for the item's basic unit of measure is less than the decimals for the forecasted quantity, the number must be rounded off. Rounding is done according to following rules:

Example of forecasting in the material plan

Period Quantity Basic U/M Decimals Working days
Nov –98 100 PCS 0 21

Forecast per working day = 100/21= 4,7619

Forecast in material plan with

  Monthly Weekly Daily
Date Day Buckets Buckets Buckets
29-10-98 Thurs      
30-10-98 Fri 100*    
31-10-98 Sat      
1-11-98 Sun      
2-11-98 Mon   25* 5
3-11-98 Tues     5
4-11-98 Wed   25* 5
5-11-98 Thurs     5
6-11-98 Fri   25*** 5
7-11-98 Sat      
8-11-98 Sun      
9-11-98 Mon   25* 5
10-11-98 Tues     5
11-11-98 Wed   25** 5
12-11-98 Thurs     5
13-11-98 Fri 100** 25*** 5
14-11-98 Sat      
15-11-98 Sun      
16-11-98 Mon   25* 5
17-11-98 Tues     5
18-11-98 Wed   25** 5
19-11-98 Thurs     5
20-11-98 Fri   25*** 5
21-11-98 Sat      
22-11-98 Sun      
23-11-98 Mon   25* 5
24-11-98 Tues     5
25-11-98 Wed   25** 5
26-11-98 Thurs     5
27-11-98 Fri 100*** 25*** 5
28-11-98 Sat      
29-11-98 Sun      
30-11-98 Mon     ***
1-12-98 Tues      

* Distribution point = 1 (beginning of period)

** Distribution point = 2 (middle of period)

*** Distribution point = 3 (end of period)

**** 4.7 is rounded to 5, since there are no decimals in the basic U/M. After 20 periods the 100 pieces are used up. Therefore, the last bucket of the month is zero.

Note: If you change the parameters in 'System Calendar. Open' (CRS900), leave the program before the valid values are used in 'Material Plan. Open' (MMS080). This is because the calendar is recalculated based on workday numbers etc. when you leave the program.

Forecast logic

The forecast logic is used to control the forecast implementation in the material plan. Some important time fences make this possible. The picture below illustrates these fences.

Forecast consumption is a key issue when setting parameters. The theory of forecast consumption is basically quite simple. If you have a forecast in a period, the customer orders consume the forecast as they are entered. Since the forecast is just that, it most likely will not match the customer orders 100% in any period. Businesses treat the difference between actual orders and forecasts differently. They either decide that the market has a memory — for example, if you surpass or do not consume as much as the forecast in one period, you assume it will even out in the following periods. This is then considered in your planning. Conversely, you can say that the market has no memory and therefore don't consider over or under consumption of the forecast.

M3 offers several possibilities with parameter settings for forecast consumption. This will help you create a setting that matches the business requirements for many companies.

Parameters in forecast logic