Forecast frozen zones

This topic describes how to prevent undesirable changes in the forecast for the short-term future.

Prevention of short-term changes in the forecast

In a vendor managed inventory (VMI) situation, if a supplier plans the supply for the customer, the supplier relies on the forecast received from the customer. If the customer changes the forecast for the near future, the supplier can become unable to adjust the plan in time.

The following types of problem can occur:

If the customer sends a new revision of the forecast, in which the forecast is suddenly increased, it is possible that the supplier cannot adapt the production level in time, because the supplier's lead times are too long.
If the customer suddenly decreases the forecast, it is possible that the supplier is left with a high inventory of unused components and subassemblies.

To prevent these problems, customer and supplier can agree on a time period in which the customer is not permitted to increase or decrease the forecast; you define this time period in a terms and conditions agreement.

Note: LN does not strictly enforce these limits. You can manually override the restrictions.

To set up frozen zones

The frozen zone is defined in the Frozen Zone - field and the Frozen Zone + field in the Planning Terms and Conditions (tctrm1135m000) session. The supplier and customer must both define these fields.

The Frozen Zone - field restricts the customer's freedom to decrease a forecast.

The Frozen Zone + field restricts the customer's freedom to increase a forecast.

Both parameters are defined as a number of calendar days from the current date.

Example

The supplier wants to be informed about decreasing demand at least 14 days in advance. The supplier wants to be informed about increasing demand at least 21 calendar days in advance.

To achieve this restriction, the supplier and the customer must set the Frozen Zone - field to 14, and the Frozen Zone + field to 21.

For detailed calculation examples, refer to Forecast frozen zone calculation.

To use the frozen zone restrictions

Customer side

When you approve the forecast, LN checks the frozen zone by comparing the forecast to the previously sent revision.If the forecast has been increased in the frozen zone+, or decreased in the frozen zone-, the system asks whether you want to approve the revision.

To determine what LN must do if a forecast was changed in the frozen zone, use the Approve Forecast changes in Frozen Zone check box in the Approve Forecast to Supplier (cpvmi0202m000) session.

If you approve a forecast that violates the frozen-zone restrictions, the supplier might refuse to approve your forecast.

Supplier side

When you accept the forecast received from your customer, LN checks the frozen zone by comparing the received forecast to the previously received revision. If the forecast has been increased in the frozen zone+, or decreased in the frozen zone-, the system asks whether you want to approve the revision.

Note: To determine the last day of the frozen zone, LN uses the date on which you received the forecast as a reference.

To determine what LN must do if a forecast was changed in the frozen zone, use the Accept Forecast changes in Frozen Zone check box in the Accept Forecast from Customer (cpvmi0206m000) session.