# To calculate demand forecast for each period

For planning purposes, it is important to have information on the expected demand for items. It takes much effort to determine the logistic parameters in order to analyze the expected demand.

Define forecasting methods

There are many methods of forecasting. In the Forecast Methods (whina2100m000) session you can tailor the existing forecast methods. In the Item - Warehousing (whwmd4600m000) session, the forecast method must be defined per item.

Calculate the demand forecast by item

To calculate the demand forecast by item, run the Calculate Demand Forecast (whina2202m000) session. As a result of the analysis, the following parameters can be adjusted based on the actual usage of items:

• Expected annual issue
• Safety stock
• Reorder point
• Forecast demand

This information can be printed on a list (in the same session). The information describes the calculation base for the reorder point.

Calculation of demand forecast for each item and period depends on the value of the Forecast Method field in the Item - Warehousing (whwmd4600m000) session:

• Moving Average
• Exponential Smoothing
• Previous Year's Calculation
• Last Period's Demand

All forecast methods use the demand figures of a number of preceding periods. When executing the demand forecast for future periods, the demand figures of preceding periods are not always available because the preceding periods can (partially) lie in future. In this case LN uses the calculated demand forecast of preceding periods instead of the actual demand figures.

The calculation and update of item ordering parameters (Expected Anual Issue, Safety Stock and Reorder Point) is always based on the forecast figure of the next future period.

Moving Average

If the forecast method is Moving Average, the demand forecast is calculated as follows:

```demand forecast = (demand + actual item issue/seasonal factor [for the relevant periods])/number of periods
```
Exponential Smoothing

If the forecast method is Exponential Smoothing, the demand forecast is calculated as follows:

```demand forecast = average demand(curr. period) + trend factor(curr. period) * seasonal factor(curr. period)
```

Where:

• Average demand is calculated as: forecast demand (prev. period) + Smoothing Factor for Demand Forecast (curr. period) * actual usage (prev. period) - forecast demand (prev. period)) / seasonal factor (prev. period)
• Trend factor is calculated as: trend factor (prev. period) + Smoothing Factor for Demand Forecast (curr. period) * [average demand (curr. period) - average demand (prev. period) - trend factor (prev. period)]
• Seasonal factors are defined.
• The smoothing factor is defined, in some cases corrected for Critical Tracking Signal Factor in the Forecast Methods (whina2100m000).
Previous Year's Calculation

If the forecast method is Previous Year's Calculation, the demand forecast is identical to Moving Average, except that the number of periods to take into account is different.

Last Period's Demand

If the forecast method is Last Period's Demand, the demand forecast is calculated as follows:

`demand forecast = average demand (curr. period) * seasonal factor (curr. period)`

Where:

• Average demand is calculated as: actual item issue (prev. period) / seasonal factor (prev. period)
• Seasonal factors are defined.
To update the inventory parameters globally

To modify and update the formulas that LN uses to calculate, for example, the reorder point, use the Global Update of Inventory Parameters (whina2200m000) session.

To calculate the Economic Order Quantity (Camp)

Use the Calculate Economic Order Quantity (Camp) (whina2201m000) session to calculate the economic order quantity according to the Camp formula.