Examples of Forecast Alarms.

M3 DMP offers two Forecast Alarms, Forecast Alarm 1 & 2. To simplify the setting up of the Forecast Alarms they are available as separate formulae in the Scoreboard Properties setup page. Both Forecast Alarms can be set up using three different methods to establish the Calculated Deviation, CDev, which is used in the calculation of the alarm triggering. They are described in detail below.

Note: MFMADV (often called MAD) and Forecast Alarm 1 and 2 can be imported from M3 BE, but is not recommended because they can not be used in M3 DMP Scoreboards.

Setting Up Forecast Alarm 1

Forecast Alarm 1 = |A(P) F(P)| > K * CDev

Example Using CDev = Exponential Smoothing

We want to set up an Alarm 1 that is triggered if this condition is met:

Actual Sales statistics Sales Forecast >= 3 * Calculated Deviation

To do this the following must be set up in the Calculation Setup of the Scoreboard Properties:

M3 DMP Setup:
ABS(M1(P) - M2(P) >= F1*CDev
Formula: Forecast Alarm 1 Demand check
M1: Sales Statistics
M2: Forecast
Mark: Sales Statistics
Upper: 3
Bound: Outside

 

CDev
Type Exponential smoothing
Smoothing (α) 0.3
CDev (P) α*ABS(M1(P-1)-M2(P-1)) + (1-α)*CDev(P-1)
CDev for P1 0

 

  Periods
  1 2 3 4 5 6 7 8 9
M1 Sales Stat 870 1000 800 940 1200 1470 860 900 1100
M2 Forecast 900 950 1000 1050 1100 1000 900 1110 1100
CDev 0 9 21,3 74,9 85,4 89,8 203,9 154,7 171,3

The green fields are indicating that Forecast Alarm 1 is activated.

 

Example Using CDev = Average Absolute Forecast Errors

 

CDev  
Type Average absolute forecast errors
Periods 3
CDev (P) Average(3,ABS(M1(P-1)-M2(P-1)))

 

  1 2 3 4 5 6 7 8 9
M1  Sales Stat 870 1000 800 940 1200 1470 860 900 1100
M2 Forecast 900 950 1000 1050 1100 1000 900 1110 1100
CDev N/A N/A N/A 93,3 120,0 136,7 226,7 203,3 240,0

The green fields are indicating that Forecast Alarm 1 is activated.

Example Using CDev = Average Absolute From Mean Demand

 

CDev  
Type Average absolute error from Mean Demand
Periods 3
Mean demand MD  
N 3
CDev (P) ( ABS (M1(P-1) - MD) + ABS(M1(P-2) - MD) + ABS(M1(P-..) - MD) + ABS(M1(P-n) - MD) ) / n

 

  1 2 3 4 5 6 7 8 9
M1 Sales Stat 870 1000 800 940 1200 1470 860 900 1100
M2 Forecast 900 950 1000 1050 1100 1000 900 1110 1100
MD     890 913,3 980,0 1203,3 1176,7 1076,7 953,3
CDev N/A N/A N/A 73,3 75,6 146,7 177,8 211,1 262,2

The green fields are indicating that Forecast Alarm 1 is activated.

Setting Up Forecast Alarm 2

The Forecast Alarms 2 formula looks like this:

Example Using CDev = Average Absolute Forecast Errors

We want to set up an Alarm 2 that is triggered if this condition is verified: Actual Average of Actual - Forecast >= 0.6* Calculated Deviation. To do this the following must be set up in the Calculation Setup of the Scoreboard Properties:

 

M3 DMP Setup:
AVG(n,ABS(M1(P) - M2(P))) >= K*CDev
Formula: Forecast Alarm 2
M1:  Sales Statistics
M2:  Forecast
Mark Sales Statistics
Upper: 0.6
Bound Outside
n 3

 

CDev  
Type Average absolute forecast errors
Periods 3
CDev Average(3,ABS(M1-M2))

 

  1 2 3 4 5 6 7 8 9
M1 Sales Stat 870 1000 800 940 1200 1470 860 900 1100
M2 Forecast 900 950 1000 1050 1100 1000 900 1110 1100
CDev N/A N/A N/A 93,3 120,0 136,7 226,7 203,3 240,0

The green fields are indicating that Forecast Alarm 1 is activated.

Note: It is also possible to set up Forecast Alarm 2 using the CDev types Exponential smoothing and Average absolute error from Mean Demand. Refer to the descriptions of setting up Forecast Alarm 1 using these types above.