Demand Forecasting

[Former Member]

Hi experts, how are you?

I´m trying to fix the MRP of the company I work for, and I need your help. When it comes to demand forecasting, I can´t find the formulas for the Trend model, and for the seazonal model. Can you tell me which are the formulas used and, if possible, give me an example using the following historical data?!

43 52 80 84 56 84 125 129 35 90

86 91

I need the exact formulas for each of the models... I´ve been going crazy after these things for the past week.

Thanks,

Felipe Carvalho

[jasonm2 · Accepted solution]

Why don't you let SAP find a forecasting model automatically?

[Former Member · Accepted solution]

I don´t want SAP to have total control over it, and I want to monitor and make sure I have picked the best model....

I rather have control of it then SAP.

[Former Member · Accepted solution]

Felipe,

 I´ve been going crazy after these things 

I rather have control of it then SAP

These two statements are related. You sound just like me, back in 1990, when I first started using statistical forecasts to predict sales.

In forecasting, you are predicting the future. Forecasts by their very nature are always either 'wrong' or 'lucky'.

SAP (and the other major ERP systems) performs forecasts using industry standard forecast models. SAP provides forecast analyses, also common to forecasting, which indicate and select the forecast method that statistically is expected to be 'the least wrong'. The mathematical details are generally irrelevant unless you are a statistician, and not a businessperson.

In business, it is generally considered to be a waste of time ($) to manually analyze forecast models, when you are forecasting large datasets. Usually, the only time one intervenes in the statistical forecast process is when there is an expected business event (e.g., marketplace change) that cannot be inferred mathematically. Beyond this, you are just playing with numbers.

I can't tell you the number of forecast meetings I have attended, where someone claims to have a more accurate forecast than the ones automatically selected. In my experience, 90% of the time the original, automatically selected forecast, ends up having the least variance to the actual.

Of course, maybe you are that one-in-a-million genius able to improve that last 10%....

Best Regards,

DB49

[Former Member · Accepted solution]

Thanks for your answer DB49, but the CEO of the company wants me to do it manually so, if anything goes wrong, he can blame me. LOL....I work in retail, so every forecast is a mistery and it will never be 100% correct. I am just looking for ways to minimize that error. I am trying to talk them into select it aultomatically, but they are not sure yet. If I knew the formula for the seazonal model, I would be able to tell then the best way, and that we won´t be mistaken. I have already found the trend model one, just looking for the seazonal one now.

Thanks for your time,

Felipe Carvalho

[Former Member · Accepted solution]

Felipe,

If you have been instructed by the CEO to ignore the automatic functionality, and you are also expected to be responsible for the results, then you better polish up your resumé, since you will soon be looking for a job.

And my opinion, even if you didn't ask: If you think that technical knowledge of a particular forecasting method will make your forecasting ability any better, then I wish you luck. Let me know in 10 years if you still feel the same way.

Seasonal model is alluded to in the help. From the help:

Seasonal requirements pattern
If your past consumption data represents a seasonal pattern, you can specify the seasonal model you want. The system calculates the forecast values for the seasonal model by means of first-order exponential smoothing.

Formulae are here

http://help.sap.com/saphelp_erp60_sp/helpdata/en/7d/c27a07454011d182b40000e829fbfe/frameset.htm

Best Regards,

DB49

[Former Member · Accepted solution]

Thank you DB49.

I´m sure I will get them to trust the system, I just need to prove it to them.

Thanks

Felipe Carvalho

[Former Member]

What parameters do I have to change so that the system will automatically give me the best model? What do I need to feed the system with? I have been doing some tests and I can´t seem to figure it out, since every material is very different from the next one.