Generates a forecast for new items as soon as they start to sell. Uses month-to-date sales to influence the forecast for “Young” items (those with less than 4 months of sales history)

It’s best to leave this setting on. This will ensure that forecasts for young items can get recalculated mid-month if required in order to have orders based on a more accurate forecast based on the month-to-date sales.

Bear in mind that increasing the current month’s forecast will really only prevent the item from stocking out this month if it has a short supplier lead time. Increasing this month’s forecast when the supplier has a 120 day lead time means the additional stock it requires this month in order to avoid a stock out will only arrive in 4 month’s time when it is no longer needed.

Luckily, items with long lead times will have higher amounts of safety stock calculated to protect them against this happening.

As I’m sure you know by now, the forecast is a crucial factor in calculating the recommended order quantity and placing the best order that will not result in excess or stock outs. Inaccurate forecasts lead to inaccurate orders.

For young items with limited sales history, generating an accurate forecast is even more challenging. Are you over-forecasting and thus over-ordering excess stock? Or are you under-forecasting and thus under-ordering, resulting in stock outs?

For ‘normal’ items with loads of sales history, forecasting once a month is good enough.

However, for these young (new) items, daily forecasting may be required to ensure accurate orders.

Imagine that last month, you forecasted the young item will sell 100 units this month. You are halfway into the current month. You expect that the item would have sold 50 units. However, this young item has already sold 200 units. Reforecasting this young item means that the forecast will be increased to 400 units and accurate ordering can occur.

Question: How did you get to that number?

Answer: We are 15 days into the month and have sold 200 units. Our daily rate of sales for this item is 200/15 = 13,33 units/day. There are 30 days in this month. Daily rate of sales * days in this month = 13,33 * 30 = 400.

Question: Can I get a harder example?

Answer: Sure. Last month, you forecasted that the young item will sell 100 units this month. You are 7 days into the current month and have sold 43 units. What does the forecast need to be adjusted to?

Daily rate of sales = units sold to date / days into the month

= 43/7

= 6,143 units/day.

Adjusted forecast = Daily rate of sales * total days in this month

= 6,143 * 30

= 184

Question: Can’t I forecast all my items, young or old, daily?

Answer: No. There are multiple reasons to not forecast established items daily.

The most important reason: Processing time. Forecasting all items daily significantly increases the time required to run the daily import schedule.

Second reason: It may actually be detrimental to your forecast. Imagine you sell 100 pizzas every month. Your sales history depicts 100 pizzas being sold a month and as a result, you forecast on selling 100 pizzas a month. You are halfway into your current month and have sold 10 pizzas. Reforecasting this item (pizza) will result in the forecast being adjusted to 20 units. However, payday arrives at the end of the month, all your customers want pizza, and now you have stocked-out due to lowering your forecast. Moral of this story: Some items simply sell better or worse during certain times of the month. Forecasting the month as a whole based on monthly sales history as a whole is more accurate than forecasting daily.

Question: Pizza is an interesting example. Should I not be forecasting it daily instead of monthly to ensure it does not go off?

Answer: Good spot! And that is where our other product, Predictor IBP comes in to save the day. Predictor Inventory Advisor (IA) works best with non-perishable goods where capacity planning is not required.

Question: If I can’t re-forecast my established items daily, how will I know if I got this month’s forecast wrong?

Answer: That’s where it is important to compare the item’s MTD (month-to-date) sales with how far into the month you are and make decisions based on that. This exception report can be accessed on the Forecast screen.