Trend

Description

Trend estimates are used when extrapolating base forecasts.

Calculation method

The following methods are used to calculate a trend factor and trend quantity.

Calculating the trend factor

The trend factor is defined as the mean relation (ratio) between demand in two sequential calculation periods minus 1. This calculation is based on trend periods of user-specified length. The following formula is used to calculated the trend factor.

Tf(i + 1) = (Dr(i) + .... + Dr(i - x / 2 + 1)) / (Dr(i - x / 2) + ...... + Dr(i - x)) - 1

A negative trend factor signifies a downward trend, and a positive trend factor signifies an upward trend.

Calculating trend quantity

Trend quantity is the mean difference in demand during two sequential forecast periods. The following formula is used to calculate the trend quantity.

Tq(i + 1) = ( * (F(i + 1) - F(i)) + (1 - () * Tq(i)

Key:

(	=	Smoothing constant for exponential smoothing
Dr(i)	=	Actual demand during period (i) reduced by any manual forecast adjustment and non-representative demand
F(i)	=	Base forecast during period (i)
Tf(i)	=	Trend factor for period i()
Tq(i)	=	Trend quantity for period (i)
i	=	Period number
p	=	Trend calculation period length

Description

Assume the following demand for an item.

Jul. 95	Aug. 95	Sept. 95	Oct. 95	Nov. 95	Dec. 95
120	109	117	118	121	125

Base forecast Dec. 95: 119

Base forecast Jan 96: 124

( factor used: 0.3

Number of trend calculation periods: 12

The following trend factor and trend quantity are calculated for January 1996.

Calculating the trend factor

Tf(Jan.) = (Dr(Dec.) + Dr(Nov.) + Dr(Oct.)) / (Dr(Sept.) + Dr(Aug.) + Dr(Jul.)) - 1 = (125 + 121 + 118) / (117 + 109 + 120) -1 = 364 / 346 -1 = 0.05

Calculating trend quantity

Tq(Jan.) = 0.3 * (124 - 119) + (1 - 0.3) * 3 = 0.3 * 5 + 0.7 * 3 = 3.6