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Do you have a Question? You can post your questions here
for a customized response. An Archive of past questions
and informative discussions are available for registered users
of this site. Please contact us with
your information for access to the archives along with a reference
to the DP serial number of each question.
DP001 - Is there a merit in calculating forecast accuracy
for dollarized sales and decomposing it into Unit error and Price
error?
There is every merit in tracking Forecast Accuracy in any organization.
In fact, we will go on to say that the single most important metric
in the entire organization is Sales Forecast accuracy.
 More.
DP002 - Why do you measure accuracy/error as forecast-actual
/ actual and not over forecast?
Historically Sales groups have been comfortable using forecast
as a denominator, given their culture of beating their sales plan.
Since most of the demand planning evolved from Sales function,
MAPE was also measured this way. So this was mostly cultural.
In such a scenario, Sales/Forecast will measure Sales attainment.
For example, sales of 120 over 100 will mean a 120% attainment
while the error of 20% will also be expressed as a proportion
of their forecast. So it was more of a convenience for Sales Management.
More.
DP003 - In calculating safety stock, you state that lead
times are determined externally. Is the lead time given to you
by the customer (which could vary enormously from customer to
customer for the same SKU) or internal lead times for replenishment
of inventory of the SKU?
Depending on where the safety stock policy is set, the
lead-times
are determined by the production or distribution process. For
example, if Plant A takes three months to produce and ship a product
to Distribution point XY, the lead time for safety stocks here
is three months for setting inventory policy at Distribution Point
XY. To be consistent, the safety stock at XY is based on the demand
forecast error at this DC. This demand forecast error will be
a function of the individual customer demand forecast errors at
this DC.
More.
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