Customer product forecasts
Standard, non-forecasted, usage in Distribution SX.e uses actual sales history for the previous 25 months to calculate usage and make purchasing recommendations for the next month. Standard usage expects future usage to correlate to historical usage and does not account for changes in your business that might result from securing new business and requiring increased inventory.
With customer forecasting, you can accommodate anticipated new business in addition to the actual usage for the previous 25 months and factor anticipated volume into purchasing recommendations for the next 12 months. When you use customer forecasting, the total forecast quantity to purchase for all active forecasts is included in the purchasing recommendations of the Purchase Entry Recommended Replenishment Action Report and the Transfer Entry Recommended Replenishment Action Report. Buyers can view the forecast quantity in Purchase Demand Center Entry and Transfer Demand Center Entry when reviewing line item details. For items with forecast quantity, buyers can access the Customer Forecast Details record for information about the forecast and quantities to help with purchasing decisions.
Creating forecasts
Forecasts are created in Product Customer Reservation/Forecast Setup. You can create product forecasts for a customer, shipto, or shipto group. Forecast by customer, shipto, or shipto group to specify and track forecast performance for a specific customer, shipto, or by a set of customer locations (a shipto group). You can use this feature to create forecasts that prompt purchasing inventory for the locations that require it.
A shipto group consists of multiple customer shipto addresses which you group together by assigning them to a group that you create in Customer Ship To Group Setup. For example, if a customer has a set of regional locations served by a specific warehouse, you can forecast demand by these regional groups using shipto groups to track usage and generate forecast quantities. Tracking usage by shipto group consolidates usage to allow inventory forecasting for the warehouse that serves the group.
Updating forecasted usage
During invoice processing, actual usage data required for standard and forecasted usage is recorded. For products that require usage recorded for forecasting, the product usage is recorded for the warehouse and the warehouse product. Typically, the warehouse is the warehouse where the quantities are taken, unless the ARP does not match the sourcing information. In these situations, usage is recorded for the warehouse that should have provided the goods. The warehouse product is the actual product sold, unless an automatic product substitution occurred, in which case product usage is recorded for the intended warehouse product instead of the actual product sold.
Distribution SX.e does not track usage for labor products, non-stock lines, special order item when it is not an order as needed product, a stock product on a direct order, or build-on-demand (BOD) kit parent products. Usage is tracked for all other product and order scenarios, unless an operator overrides the usage flag in Sales Order Entry-Extended.
Forecasted usage is updated by the Product Administration Month End Processing Report. It uses the actual usage data recorded during invoice processing and forecast quantities from the Customer Forecast Detail record.
This hierarchy is used to locate an active forecast record for the product:
- Is there an active forecast set up in Product Customer Reservation/Forecast Setup for the product?
- Is the ICET posting date within the forecast’s start and end dates?
- Was a shipto code specified on the order?
- Is there a FS type forecast that matches the customer number, shipto, usage warehouse, and usage product?
- Is the shipto address is assigned to a shipto group?
- Is there a forecast with type FG that matches the customer number, shipto group, usage warehouse, and usage product?
- Is there an FC type forecast that matches the customer number, usage warehouse, and usage product?
Calculating usage, demand, and forecasting
The non-forecasted usage rate is stored in Product Warehouse Product Setup. Actual usage data, forecasted and non-forecasted, is stored in Product Warehouse Product Setup. Forecasted usage data is stored in Customer Reservation/Forecast Setup-Detail. The non-forecasted usage rate is used to calculate the non-forecasted order point, line point, and other ordering controls. To calculate replenishment recommendations, forecast data is added to the non-forecasted ordering controls from Product Warehouse Product Setup.
When the product warehouse usage is calculated, the forecasted actual quantities from Customer Forecast Detail are used to determine the non-forecasted usage rate. The actual usage quantities for unexpired, active forecasts are subtracted from normal product warehouse usage. If the ordering controls require the past usage of expired forecasts to be included, the value in the Expired Forecast Usage field determines whether to subtract the actual usage from the normal usage.
You can specify a value in the Estimated Run Rate% field for the expected percent of forecast the customer will actually purchase. For example, if a customer agrees to buy 100 units of a product per month and there is an 80% chance of the order, then the estimated run rate % would be entered in the Forecast as 80%. If the customer only consumed 50 for one month then the actual run rate is 50% and the buyer may choose to not buy the next month's quantity due to under-utilization, or low run rate.
At the same time, you can exceed the forecast when the run rate is exceeded. For example, a customer may contract to buy 1200 units of a product per year and request that 100 units of the product available per month. One month a customer may purchase only 50, and another month the customer may purchase 150. The forecast and the run rate are reported to the buyer to aid purchasing decisions, but the actual customer forecast remains the same.
Forecasted usage is not calculated for warehouse products when the usage rate calculation is set up for the demand planning method. Purchase and transfer demand centers do not take account of customer forecasts because demand planning uses an external method to determine the quantity to order. When you use the Product Administration Demand Planning Report to extract replenishment data, note that the customer forecasts are not included to determine quantities. The external supplier must include any anticipated forecasted usage expectation in the quantity supplied.
Example 1: Usage rate calculation for unexpired forecast
In this example, usage rate is calculated for an active, unexpired forecast for the current month, February 2015, using the backward 3 method.
| Month | Normal Usage | Actual Quantity Customer 101, 12-month forecast started 07/10/2014 | Actual Quantity Customer 3000, 6-month forecast, start date 01/01/2015 |
|---|---|---|---|
| November | 10 | 3 | 5 |
| December | 22 | 6 | |
| January | 18 | 4 |
Standard calculation: (10 + 22 + 18) / 3 = 16.67
Non-forecasted calculation: (10 - 3 + 22 - 6 + 18 - 4 - 5) / 3 = 10.67
The non-forecast usage rate (10.67) displays in Product Warehouse Product Setup-Ordering, and other ordering controls are calculated using this amount. The total usage rate (16.67) displays in Product Warehouse Product Setup-Ordering and the Product Inquiry-Replenishment.
Example 2: Current and expired forecast as normal usage
In this example, Normal is specified in the Expired Forecast Usage field in Product Customer Reservations/Forecasts-General to include actual usage in the normal usage. The usage rate is calculated for an active, unexpired forecast for the current month (Feb. 2015) using the backward 3 method.
| Month | Normal Usage | Actual Quantity Customer 101, 12-month forecast started 01/01/2014 | Actual Quantity for current active forecast Customer 101, 12-month forecast, start date 01/01/2015 |
|---|---|---|---|
| November | 10 | 3 | 4 |
| December | 22 | 6 | |
| January | 18 |
Standard calculation: (10 + 22 + 18) / 3 = 16.67
Non-forecasted calculation: (10 + 22 + 18 - 4) / 3 = 15.33
The non-forecast usage rate (15.33) displays on the Product Warehouse Product Setup-Ordering, and other ordering controls are calculated using this amount. The total usage rate (16.67) displays in Product Warehouse Product Setup-Ordering and the Product Inquiry-Replenishment.
If Remove is specified in the Expired Forecast Usage field in Product Customer Reservations/Forecasts-General, the actual forecasted usage is subtracted from normal usage as in Example 1.
Initial usage rate calculations
Usage data in Distribution SX.e for periods that precede your implementation of forecasting includes all sales usage. Because no forecast usage data exist, past forecasted usage is treated as if it were normal usage, which can result in overstated usage rate expectations. To prevent overstated usage results, you can run the Product Customer Reservation/Forecast Import Report to import your past forecast data.