Forecast Consumption Setting
Forecast consumption consumes forecasted demand with actual sales demand. Each time a new sales order is generated, based on the consumption settings, the forecast demand is decremented by the sales order quantity to avoid counting the same demand twice. The remaining forecast is then added to the sales order calculate the total demand plan quantity used for requirement planning.
The consumption process takes the sum of sales orders by due date and due quantity in a planning bucket and then consumes the forecast value in each bucket based on the backward/forward days setting – going backward first and then forward. If the setting is days, then the forecast quantity consumed does not go beyond the total days specified (days constrain the amount of forecast that can be consumed within the established time frame). If weekly or monthly is chosen, the forecast in the period is consumed by the order quantity regardless of what day the order falls within the week of the month.
Please Be Aware:
The setting is under "Requirement Planning Settings." The forecast consumption works only with Order/Statistical Forecast and MTO Order/Forecast consumption types.
The daily forecast consumption in the plan horizon weekly bucket periods are rounded up to a week. This means a forward consumption of 15 days would be rounded up to 3 weekly bucket periods.
Consumption are based on due date and due quantity. This means if an order is shipped early the consumption is applied based on the due date and quantity and not ship date. Please download the excel requirement plan grid to view the detail of consumption.
If the following Company settings are enabled:
- "Use Daily Requirement Plan:" and
- "Use Working Days Only:"
The forecast consumption will be based on working days. This means weekends will not be included in the calculation.
For example, 14 days would mean 14 working days excluding weekends. When in the weekly bucket horizon, the days are rounded up to a full week.
Forecast consumption period and type are defined from Multiple Edit and Options tab under "Requirement Planning Settings."
These settings are applicable only when the requirement planning consumption type setting Order/Statistical Forecast or MTO - Order/Forecast is applied against the SKU.
There are 4 types of forecast consumption:
- Forward: Consumes forecast on a forward looking basis based on a defined period of days
- Backward: Consumes forecast on backward looking basis based on a defined period of days
- Backward / Forward: Consumes forecast first on a backward basis and then on a forward basis based on a defined period of days for each
- Weekly: Consume the entire weeks forecast. The "Weekly" consumption is available only for requirement planning with daily buckets and works only in the daily horizon. The forecast basis is the forecast for the current week.
- Monthly: Similar to Weekly, it consumes the entire months forecast. The "Monthly" consumption is available only for requirement planning with daily buckets and works only in the daily horizon. The forecast basis is the forecast for the current month.
Please note that closed orders in future weeks (i.e. shipped early) will also consume forecasts. In addition past due orders and closed orders in the past that are within the consumption period will also be part of the consumption calculation.
How Past Forecast is Handled
For S&OP enabled companies, the requirement plan is based on the approved demand plan, which contains forecast data for the past.
For non-S&OP enabled companies, old forecasts are not available however the consumption logic uses fitted forecast values generated during the forecast process as the basis of the past consumption.
Forecast Consumption Rules
Daily Consumption
The process considers those orders that fall within the time frame of the backward and forward consumption. This includes both open and closed customer orders with due dates for open orders and ship dates for closed orders within the consumption period.
For the example below, the item has a forward consumption of 8 days and backward consumption of 5 days.
The process starts on the day of the requirement plan and excludes weekends in this example. The process considers all open and closed orders within the forward consumption time frame starting 8 working days in the past which would be March 13. From there is considers all the sales orders in the forward period and then consumes the past forecast 5 days backward first and then forward in forward looking incremental manner.
The past order of 4800 consumes the consumes the forecast backwards first and the forward within the stated time frame. Then the past order of 4000 consumes and remaining forecast left from the previous order and continues the consumption forward.
In the highlighted cell, the forecast of 510 was first consumed by the past order on 22-Mar followed by the order of 53 leaving 326 as the remaining forecast.
Monthly and Weekly Consumption
Monthly and weekly consumption is far less complex as compared to daily consumption. For monthly consumption, the orders and forecast values are collected from the beginning of the month in which is the forecast start date. For example if the requirement plan is generated on 1st of March there will be no past orders or forecast collected since it aligns with the start of the current month. However, if the requirement plan is generated on 5th of March the past orders (open and closed) and forecast will be collected from 1st of March and will consume backward until the first and then forward starting on the 5th until the end of the current month.
The weekly consumption is the same as the monthly consumption with the difference being the consumption starts at the beginning of the current week.
Forecast Consumption Setting
The forecast consumption setting is found in the Item Selection Multiple Settings Edit under Requirement Planning Settings, and ...
In the item options tab under Requirement Planning Settings.
As a reminder, for the Forecast consumption setting to be applied, the requirement planning consumption type setting must be set to Order/Statistical Forecast or MTO - Order/Forecast.
Forecast consumption example - 14 days forward consumption
Result
The independent demand consumes the forecast which results in the remaining forecast value. This in turn reduces the order point of the item. The total demand value then becomes the sum of the remaining forecast plus open customer order. In short, this means that the reorder requirement will not be overstated due to customer orders consuming the forecast.
Option: Download the basis of the calculation
Since the forecast consumption may use closed orders in the past, we have added a file that may be downloaded to help understand the basis of the calculations.
To download, click on the Excel download button in either the weekly or daily (if enabled) planning table grid.
The resulting file will provide a detail of the orders being used to consume the forecast.
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