Calculating Sales Forecasts
This supporting function is used to automatically recalculate the actual values from the latest period for a forecast for future periods.
The number of future periods included in the forecast is specified in the parameter Extrapolation periods for the forecasting method in 'Sales Forecast Method. Open' (OSS430/E).
The forecast calculation uses the selected forecast method. The method is entered in 'Sales Forecast Method. Open' (OSS430) where the forecast formulas and number of extrapolation methods are specified.
Follow these steps
The section below describes the scope of this supporting function.
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Calculating base demand for period
The actual demand is first adjusted to reflect seasonal curve and the number of workdays in the period. Demand is divided by the seasonal variation and period length factor as in the equation below to derive the base demand for the period. For more information about seasonal curve, refer to document in See Also section.
D(i) = Dr(i) / S(i) / P(i)
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Calculating base forecast for next period
The base forecast for the next period, F(i + 1), is calculated from this base demand. This is done using either the selected forecast formula or Forecast Simulation - Sales Statistics.
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Adjusting forecast with seasonal curve
This base forecast is adjusted for each of the following periods to reflect seasonal variations and the number of workdays in the period. Using the seasonal index and period length factor, the base forecast is:
- multiplied by the seasonal index for the period – seasonally adjusted, and
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multiplied by the period length factor, as in the equations below.
Fs(i + 1) = F(i + 1) * S(i + 1) * P(i + 1)
Fs(i + 2) = F(i + 1) * S(i + 2) * P(i + 2)
Fs(i + 3) = F(i + 1) * S(i + 3) * P(i + 3)
This is done for every period included.
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Adjusting forecast with trend factor
The base forecast is also adjusted to reflect any trends present. This is done using either a trend factor or trend quantity.
When using a trend factor, the factor is calculated from a trend quantity per period using the equations below for every period included:
Tq(i + 1) = Tf(i + 1) * F(i + 1)
Tq(i + 2) = Tf(i + 2) * (1 + Tf(i + 1)) * F(i + 1)
Tq(i + 3) = Tf(i + 3) * (1 + Tf(i + 1)) * (1 + Tf(i + 2)) * F(i + 1)
Calculating the trend factor takes into account the trend dampening method, and the factor is checked so it does not exceed minimum or maximum values.
When using trend quantities, these are calculated per period using the equations:
Tq(i + 1) = Tq(i + 1)
Tq(i + 2) = 2 * Tq(i + 1)
Tq(i + 3) = 3 * Tq(i + 1)
The Forecast with trend parameter in the forecast method regulates whether the calculated trend quantity is added to or subtracted from the forecast for the first period.
Therefore, the forecast that is adjusted regarding season, period length, and trend is:
Fst(i + 1) = Fs(i+1) + Tq(i + 1)
Fst(i + 2) = Fs(i+2) + Tq(i + 2)
Fst(i + 3) = Fs(i+3) + Tq(i + 3)
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Final calculation
The final forecast is calculated by adding or subtracting the manually entered forecast adjustments to/from the forecast as adjusted above for seasonal variation, period length and trend. The resulting forecast is:
Ftot(i + 1) = Fst(i+1)
Ftot(i + 2) = Fst(i+2)
Ftot(i + 3) = Fst(i+3)
Key to variables
D(i) | = | Base demand for period I |
Dr(i) | = | Actual demand for period I |
F(i) | = | Base forecast for period I |
Fs(i) | = | Seasonally and period-length adjusted base demand – period I |
Fst(i) | = | Seasonally, period length, and trend adjusted base demand - period I |
Ftot(i) | = | Total forecast for period I |
(i) | = | Period length adjustment factor |
SP(i) | = | Seasonal index for period I |
Tf(i) | = | Trend factor for period I |
Tq(i) | = | Trend quantity for period I |