There are three options for generating forecasts in a region:
Regional forecasting - Aggregates the sales history across individual locations and recalculates the forecast at the Region based on the combined sales history - this will result in a smoother, and more accurate forecast. The Region forecast exists only at the Region and does not influence and is not influenced by the individual locations forecasts.
Sum of locations - Aggregates the sales history and the forecasts from the individual linked locations to the Region rather than recalculating the forecast at the Region.
Disaggregate forecasts - Aggregate the sales history across individual locations and calculate the forecast at the Region - this will result in smoother sales history and thus a smoother, more accurate forecast. The Region forecast is then disaggregated down to the individual locations according to their percentage contribution to the total sales history at the Region.
The demand type being used at the region can be seen on the inquiry screen. Refer to Region creation options. If the demand type is neither, it means that forecasts are generated from the sales history in the region and that each item will have its own demand type (regional forecasting option above). These forecasts will not get split down to the individual locations.
Where do I specify whether to use disaggregation or sum of locations?
When creating a region, you may specify whether to consolidate forecasts (sum of locations), disaggregate forecasts (disaggregation) or neither (each item will have its own demand type and forecast recalculated at the region).
NOTE: The “consolidate forecasts” and “disaggregate forecasts” options can’t both be selected.. Forecasts cannot be both summed from individual locations and disaggregated from the region at the same time.
Refer to How to set up and configure a region
Why use disaggregation (disaggregate forecasts)?
The primary reason for using disaggregation is when there are too many locations to manage individual forecasts at. Using disaggregation reduces the amount of forecast planning time required.
Another possible reason to use disaggregation is because the sales history in the individual locations (branches) may be volatile, resulting in a higher risk of inaccurate forecasting. Because the region uses the consolidated sales history across all the locations, the sales history at the region is a lot less erratic. Smoother sales history results in more predictable, more accurate forecasts. The smooth forecast can then be disaggregated down to the individual locations according to their percentage contribution to the total sales history at the region.
Using disaggregation means that any global forecast adjustments will also be split accordingly across the various locations. This means that a 25% spike due to a promotion will reflect more realistically when applied to the region and then disaggregated when compared to the individual forecasts.
Why use sum of locations (consolidate forecasts)?
If the forecasting at individual locations is accurate enough and you don’t have access to the Netstock Inventory Advisor disaggregation functionality, you may opt to use sum of locations as a way of sense checking the aggregated forecasts across multiple locations.
PRO TIP: If a forecast is frozen at a region level, the next update that “sums the forecasts” from the linked branches, will not overwrite it.
Why use regional forecasting (neither options)?
Similar to using the disaggregate forecasts option, this option is useful when the sales history in the individual locations (branches) is volatile, resulting in a higher risk of inaccurate forecasting. Because the region uses the consolidated sales history across all the locations, the sales history at the region is a lot less erratic. Smoother sales history results in more predictable, more accurate forecasts.
Unlike the disaggregate forecast option, this option is suitable when the region forecast is not required to be split down to the lower levels, and planning will be done at the region instead of the individual locations.
As the disaggregation functionality is an optional add-on in Inventory Advisor, this option also provides the benefits of forecasting based on consolidated sales history without investing in the add-on module.
Refer to Advanced Forecasting Module and forecast disaggregation for more on this module and how it could benefit you.
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