A forecast method is a set of calculation principles and options for calculating and checking forecasts.
These are used to set how demand forecasts are calculated. A forecast method is specified per item/warehouse and can to a large extent be defined by the user. This is done by setting steering parameter values, control parameters, and the different tolerance limits, as well as calculation options.
The options listed below can be specified in a forecast method:
Whether forecasting is manual or automatic
The forecast formulas used
The forecast alarm factors used
The demand types used
How seasonal variations are taken into account
How trend changes are taken into account
Tolerance limits for allowable trend changes
Trend dampening method
How the number of workdays in a period are taken into account
The smoothing constants used for exponential smoothing
Tolerance limits for smoothing constants
The number of historic periods and forecast periods used
The method for calculating forecast MAD
The method for calculating mean forecast error.