Forecast Levels.png

27 Sep 2019

Forecast Level Optimization

In a recent client engagement, there was some lively discussion on Demand Modeling using the Product/Customer Hierarchy.             

Although your forecast agreement with Supply Chain and Senior Management may call for delivering a forecast at the lower level - SKU/DC etc, this does not mean that you formulate models or conduct business reviews at this level.

Also, I have seen some worst practices in Demand Planning. Sometimes demand models are set to run at the lowest possible levels and this could be Customer, Channel, Product, DC, and Customer Ship to location. Probably this is the result of an ambitious system design meant for an accounting system NOT a planning system.

Intelligent design involves finding the optimal level through data mining and analytics along with the supply chain requirements. This design considers both postponement as well as the supply strategy.

Do you always model your demand at the lowest level?

How is this treated in the S&OP meetings where discussions are held at the family level?

In our upcoming CADP workshop, we will be discussing Forecasting Level Optimization and some easier conceptual methods to start this process before applying quantitative methods.

Leave a Reply