Navigate to Settings > Configuration > Forecast
Definition
Definition
This setting will include zero sales at the beginning of the history. This may result in a lower forecast for items with fewer months of sales history.
Use case
Use case
This is useful for new items where the first month is a pipeline fill that won’t be replicated in the second month. If there is one month’s sales history of 1000 units, it’s useful to add 1 leading zero so the forecast will be for 500 units instead of 1000.
Before using this parameter, consider the following:
How many new products are introduced in a month?
If the answer is one or two, don’t use this parameter.
Do the new items typically sell more or less in the second month than in the first?
If it sells less, use this setting.
If it sells more, don’t use this setting and ensure proper forecasting for these new items are done to reflect the upward trend in sales.
Explanation
Explanation
Imagine a business that supplies new items to big resellers (customers). The first order will be a Replenishment Cycle’s (RC) worth PLUS Safety Stock (SS). In an ideal world, their customer will place another order before dipping into their safety stock, thus only ordering an RC’s worth on their next order.
In this case, a leading zero will be useful to reduce the risk of over-forecasting.
Now imagine a business that supplies new items to the general public.
If the item being supplied is a regular, unnoteworthy product, such as a towel, there may be no reason to assume sales will be lower next month than this month.
In this case, a leading zero is not required. In fact, a leading zero could lead to under-forecasting.
However, if the item being supplied is the latest iPhone or video game release, there’s likely to be more sales in the first month than in the following months.
In this case, a leading zero will be useful to reduce the risk of over-forecasting. Although, in extreme cases like this, proper promotion planning is preferred.
If the item being supplied is a slow moving item which sells every few months, an early sales does not necessarily mean the item will sell the same next month or the month after.
In this case, adding one or more leading zero will be useful to reduce the risk of over-forecasting.