Testing times for everybody mean we are trying more and more ways to resolve problems. In our business we are constantly being asked by pressurised business owners and managers, how can I handle such erratic demand?, yet satisfy demand. I must reduce Stock, I can’t afford to hold it yet I must work with powerful suppliers otherwise they won’t give me stock when needed. Big problem and the answer is. DO the maths!
What do we mean? well maths includes statistics and elementary statists could be the answer to your problem. Sales forecasting software from MXI UK such as Forecast PRO examines trends in your sales, stock, purchasing histories. Statistics forecasting methodologies such exponential smoothing helps business everyday carry less stock meet weaker demand as it arises. The technical explanation is that statistical smoothing techniques common to sales forecasting software such as Forecast PRO weights recent sales, stock time series history (i.e. the financial crises & recession). In other words, recent observations are given slightly more weight in the forecast than the older observations. This is a very popular scheme to produce a smoothed Time Series.
Thats why we developed the very popular MXI free forecast review session. Send us your data and we will forecast it free online free. (UK/IRL) only:
We help companies and organisation to use Forecast PRO sales forecasting software exponential smoothing to detect seasonal changes in data by ignoring the irrelevant fluctuations irrelevant. Further we can select other methods such Holt Winters, simple trend-line or same as last year plus or minus a delta (if required), incremental growth.
Of course we encourage users to intervene directly themselves using the human experience and interaction to finesse the forecast. Sales forecasting software can’t be aware of increased advertising, reduced marketing, promotions, end of line, new product launches, etc. Sales forecasting software builds greater supply chain accuracy into the forecast. Results always need intepretation, human intervention and finessing.
Our Excel challenge works with organisation everyday to demonstrate how we can speed up forecasting, sales and operations planning, demand management. Check out the excel challenge for yourself to see how you can start moving in the right direction.
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June 2010-UK Retail rise again. Here are 2 Tips to take advantage Sales are rising in different retail sectors except food, In the UK sales forecasting software Forecast PRO is helping sales forecastors drive British economic growth whilst reducing on hand stock and finance costs.
For June the figures were UK retail sales rose 1.2% in comparison to June ‘09, when sales had picked up 1.4%. This June was slightly less hot, but sunny for most of the month. On a total basis, sales were up 3.4% against a 3.2% increase in June 2009.
As budgeting and forecast experts we are often asked what sales forecasting software to select to improve forecasting accuracy.
These business intelligence improvements reduce the cost of the budgeting and forecasting cycle. Any improvement here flows into in the Supply Chain, reducing logistics, packaging, warehousing, marketing and finance costs just for starters.
Seasonality and Trending is usually a big issue for forecasting and planning as it plays a very big role Supply Chain planning. The large ERP systems just have enough insight or flexibility to deliver the forecasting accuracy required. We constantly come across companies who are working with 40 - 60% forecasting accuracy where they need 70% plus accuracy at least.
Remember Statistics from the school days well could save your bacon now. Using Statistics on your sales histories provides valuable insights into your forecasting requirements. BIG ERP tends to give a simple average for the last 3 months Stock, Sales or Purchasing figures and projects forward on that basis. No Science, no business knowledge, no intuition, no exponential smoothing, just cut and paste. A waste of money. Now Stats just got a bit more interesting.
TIP – Get 2 years of data (SKU, Category, Product, Regional level) and find the trend in that. You can use Statistical methodologies to select the most appropriate sales forecasting methodology to forecast sales, tax revenue, passenger numbers. Track the impact of weather and season etc.
TIP – Avoid the hassle and expense of the above learning invest in sale forecasting software. Send us your data for forecasting
For example we use Forecast PRO sales forecasting software exponential smoothing to detect seasonal changes in data by ignoring the irrelevant fluctuations irrelevant. Forecast PRO exponential smoothing (unlike moving averages smoothing) older data is given progressively-less relative weight (importance) whereas newer data is given progressively-greater weight.
Also called averaging, it is employed in making short-term forecasts. Our Excel challenge works with organisation everyday to demonstrate how we can speed up forecasting, sales and operations planning, demand management. Check out the excel challenge for yourself to see how you can start moving in the right direction.
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Contact MXI Software
Sales Forecasting software uses statistical forecasting methods to generate forecasting. We at MXI Software explain relevance of exponential smoothing for sales forecasting, budgeting and business modelling.
Exponential smoothing methods weight the historical data using exponentially decreasing weighting. The immeidiate prior period has the most weight and each period prior to it has relatively less weight. The decline in weight is expressed mathematically as an exponential function. The smoothing parameters determine the weights. To see the relevance of this in action we developed the mxi free forecasting offer. MXI 60 minute free forecast session:
Comparison Among Exponential Smoothing Methods
Single Exponential Smoothing: Identifies the percentage of weight given to the prior period and all other historical periods. It does not adjust for trend or for seasonal variance.
Double Exponential Smoothing: Finds trend then adjusts the forecast data to reflect this trend instead of generating a single parameter for all forecast periods.
Holt-Winters: Identifies both trend and seasonal variance, and adjusts the forecast data to reflect these factors. This method is tuned to both high and low outliers. A better choice for handling seasonality is Double Exponential Smoothing with the Data Filters parameter set to Seasonal Adjustment.
Advanced Parameters for Exponential Smoothing
These smoothing constants are used in the equations for exponential smoothing methods. Keep the default settings unless you have a strong background in time-series forecasting.
Alpha: Determines how responsive a forecast is to sudden jumps and drops. It is the percentage weight given to the prior period, and the remainder is distributed to the other historical periods. Alpha is used in all exponential smoothing methods.
The lower the value of alpha, the less responsive the forecast is to sudden change. A value of 0.5 is very responsive. A value of 1.0 gives 100% of the weight to the prior period, and gives the same results as a prior period calculation. A value of 0.0 eliminates the prior period from the analysis.
Beta: Determines how sensitive a forecast is to the trend. The smaller the value of beta, the less weight is given to the trend. The value of beta is usually small, because trend is a long-term effect. Beta is not used in Single Exponential Smoothing.
Gamma: Determines how sensitive a forecast is to seasonal factors. The smaller the value of gamma, the less weight is given to seasonal factors. Gamma is used only by the Holt-Winters method.
Trend Dampening: Determines how sensitive the forecast is to large trends in recent time periods. Dampening identifies how quickly the trend reverts to the mean. A higher value implies slower dampening while a lower value implies faster dampening. The smaller the value, the less effect the trend has on the forecast.
For each constant, you can specify a maximum value, a minimum value, and an interval. The interval is an incremental value between the maximum and minimum, which the forecasting engine uses to find the optimal value of the constant.
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In the Excel versus Business Intelligence battle, there is only one winner currently. It's not a fair battle by any means however the Business intelligence, financial modelling Industry lags miles behind in second place.
Vendors and enthuasists of business intelligence/ financial modelling, demand management software have long argued that user’s preference / attachment to spreadsheets is one of the biggest preventatives to real Business Intelligence. Users maintain that spreadsheets provide all the BI capability they need.
If Vendors and supporters BI software were honest with themselves they would agree that spreadsheets are not only a data source for BI applications, but often the preferred front-end access to BI application or ERP solution data.
Making things more interesting is PowerPivot in the latest edition of Excel 2010 with a lot of BI functionality. This raises the question of whether this will mean even fewer people will see a need for dedicated BI software or help drive interest in it.
The financial Modelling and business intelligence software which we sell and implement is much more proficient, cost effective and powerful. And we are willing to be put our believes to the test against the darkness hegemony (a well known company from Seatlle, not Boeing). Thats why at MXI we offer the Excel Challenge.
Whatever happens, the tension between spreadsheet users and BI supporters will increase over the next few months as more IT organizations become familiar with Excel 2010. But in the end, it’s more likely that PowerPivot will become an integral component of just about any total BI solution.
In UK / Ireland MXI implement and develop business intelligence solutions based around SQL Server, Quantrix, Forecast PRO and Excel. Free Forecast PRO Trial
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1. Forecast at the right level.
Sales Forecasting accuracy can be greatly improved by deciding on the right level to sales forecast at. Is a forecast at SKU level appropriate? In many environments it is not and greater detail must be made available by segmenting history and forecast by channel, sales region, or even customer. In other cases companies are currently forecasting at customer level when a more accurate forecast could be achieved with less effort by working at a higher level. Send us your sales history for real demo
2. Review forecasts at aggregate levels
When reviewing item level forecasts it is all to easy to "pad" each item's forecast just in case. It is not until the item level forecast is aggregated and reviewed at a brand or product category level that the cumulative effect of this "padding" is exposed in the form of a clearly unachievable growth in forecast over history. Aggregate level forecast review is an essential part of the forecast review process because it allows for a "sanity check" of the forecast compared to history and preferable company budgets. Any anomalies must be identified and corrected before putting the forecast into the inventory planning system.
3. Review forecast by exception
20% of your products are the important ones so why not use ABC analysis to focus on the products which are most important first while the mind is still fresh? Why not use deviation filters to identify the few products in the database which have unusually high or low trending forecasts when compared to history? Survey
4. Measure and report forecast accuracy
MXI Forecast Pro UK (Free Trial available) allows you to review and report on forecast accuracy as required. 100 Standard reports offer analysis to help you identify weak areas and opportunities for forecast accuracy improvement.
Success breeds success
A forecasting process will rarely be successful if the progress is not measured and the results reported to all participants. Take advantage of the functions available and start your forecast accuracy graph this month. Let everyone know how "good" or "bad" they are doing and what progress they have made over time. Success breeds success. Contact us now
SAVE YOUR FORECAST EVERY MONTH
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Demand Planners, Sales and Operations planners, Sales Forecasters are always interested in how the Forecast Pro uses data sourced from all over the organisation. Demand Managers are constantly trying to improve the accuracy of forecasts using budgeting and forecasting software. They want to reduce the use of spreadsheets and in particular focus on the most inaccurate forecasts. Many item forecasts with low volumes and patchy turnover can be as low as 20% accurate.
If you are running a large Retail, Distribution or Manufacturing company you might have data produced from your Trend purchasing screen supplied as part of their ERP Software suite. This data is also produced by a Manufacturing MRP output report after Materials requirement planning is completed. You can automoate link file so this data is pushed into Forecast Pro where the Forecast Pro expert selector operates.
Forecast Pro examines the data (each line or item) and then selects the most appropriate statistical forecasting methodology for each individual item on the list using such forecasting methods such as Holt Winters, Exponential smoothing. It's important to appreciate this point as spreadsheets simply use the same very low tech forecast approach for everything.
What should happen next is that the Forecast Pro user will having satisfied themselves that the forecast is satisfactory will push the data towards the Purchasing & Logistics department.
We have customers who improved accuracy on fast moving parts with good sales histories by as much a 8 % almost immediately and as much as 30% in the short term on hard to forecast slow moving parts.
And remember whatever you do don't just leave Forecast Pro run in the corner unattended, friendless and all alone. It's an everyday product which can continuously improve forecasting accuracy into the future. Become a friend of Forecast Pro by trying Forecast Pro for yourself at no charge. Click here for more details: Forecast Pro
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Forecast Pro Trac is the latest version of the Forecast Pro family and it's ideal for demand forecasting, demand planning, demand management, sales forecasting, item level planning, sku forecasting. Easy to use, light years more advanced than spreadsheets and enjoys award winning status for its statistical forecasting accuracy and is much less expensive than many of the alternatives.
MXI Forecast PRO UK combines forecasting, management reporting, graphing, reporting and adjustment capabilities as found in Forecast PRO unlimited. However Forecast PRO TRAC also provides easy to understand data graphics business intelligence that concentrate attention on the MAPE to drive forecasting accuracy improvement.
Forecast PRO uses will be able to select non performing forecasts and specifically concentrate attention on forecast accuracy. For example a specific exception report in the business intelligence selector allows users to select forecasts which are greater than 50% out against actuals and concentrate on them.
Forecast Pro TRAC allows you to view your data and forecasts in as many units of measure as you need. A drop down menu lets you select for example.
Rearrange your hierarchies.
With Forecast Pro TRAC's powerful "shuffling" capability, you can rearrange hierarchies with just a couple of clicks. Generate reports showing product-level forecasts broken out by customer and the
Forecast Accuracy, Identify SKU, pruduct groups which need attention
With Forecast Pro TRAC's flexible exception reporting, you can automatically flag exceptions, saving you from having to manually review a long list of items
Statistical forecasting accuracy improvement
Forecast Pro TRAC maintains an archive of your previous forecasts (both statistically-generated and adjusted forecasts) so that you can compare and contrast previous forecasts to what actually happened.
Consolidate your team's forecasts.
Forecast Pro TRAC breaks large forecasting projects into smaller pieces that can be worked on separately and then reassembled into consolidated forecasts. For example, if three demand planners are responsible for forecasting three different geographical territories, they can work on their forecasts separately; after they're done, their consolidated forecast can be further manipulated.
If you are still using Excel, download our free whitepaper on the true cost of Excel: True Cost of Excel
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In recent weeks we have worked with several companies who are using Forecast Pro and want to continue improving the forecast results from their time series data. Spanning the UK, Russia, Ireland and Spain each one of these customers had the same issues and so it a timely reminder of some facts.
Firstly they all recognised the strengths of Forecast Pro over Excel and its trendline data. Others were moving on from their ERP systems rudimentary calculations which are unable to interact with.
Even Forecast Pro sku forecast Software can't deliver immediate results. It takes time, trial and error is the best way forward in terms of planning. Once implemented take the time to learn your data and get to know the results. Be prepared to challenge the results. Consider separating data into 80 / 20 paretto analysis. Splitting some data into product/family (aggregating) levels and some at the SKU level can be effective.
Forecast Pro Top/down facility is very handy for people looking for a trend in difficult data. Isolating preferred SKU or categories is simple.
Another trend we notice amongst customers is over automation. Automatic forecasting relies on built-in features of forecasting software to choose an appropriate method for each of your time series. Like an automatic camera, automatic forecasting will work well in normal and normal circumstances. For difficult conditions, however, there is no substitute for your careful examination, judgement and expertise.
Lets face facts here you did not buy Forecast Pro to do the easy. So think John F. Kennedy, why do we want to do this, not because it is easy but because it is hard. Forecast Pro overide facility facility in the unlimited version and TRAC allows forecast overide. Human intuition, how else would we manage, ASH Clouds, Airline Strikes, Civil Service Go Slows.
So to recap, don't automate, don't expect immediate gratification, work the data, learn to use Forecast Pro and then you will reap the rewards indicated in the testimonials.
If you are not already on Forecast Pro try it out for yourself and see how it can help your company with our Forecasting Challenge. Read more: Forecast Pro
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Forecast PRO TRAC available in the UK is a great way to start improving forecasting accuracy. The Expert forecasting methodology selector allows Forecast PRO and Forecast PRO Collaborator users to save money, time and improve forecast accuracy every day. 2000 UK/Ireland Forecast Users can't be wrong. However human interaction, knowledge will always be needed.
I want more details on Forecast PRO.
2010 brings many challenges for Demand Planners, Forecasters, Sales & Operations Planning and anyone who needs to use a statistical forecasting methodology. Economic reality currently means two issues collide.
A) Everyone wants improved forecasting accuracy.
B) Confidence in forecasting and forecastors is at an all time low and patience in short supply.
Question - Did your finance department see the financial crisis coming?
FREE FORECAST PRO - Send us your data
Forecast PRO will improve the planning capability of most organisations but it takes time. Forecast accuracy is driven by small steps. In 2010 we have plenty of events driving demand, creating bias, affecting forecasts.
- Soccer World Cup
- Hardest winter in UK / Ireland for years
- Recession / Financial Crisis
- UK Election
And that is just the external issues there will be lots of other issues where experience, Industry and local knowledge is required to hone the forecast. We are working with UK business to speed this process up, focus on the problem lines first, collaborate with colleagues effectively, reduce spreadsheet reliance for example.
Confidence levels in Forecasting are low.
Forecast PRO forecasting techniques will improve accuracy now as well as in the good times. Confidence in the forecast, analysis, decisions maybe low. Fast Moving Consumer Goods patterns and Capital markets all behave differently since the financial collapse. We will help you see the changes and meet them.
In the UK/Ireland in 2010 the biggest impact on Forecast accuracy will still be the Macro assumptions, management over-rides that lead to forecast bias. An organisation's culture, behaviour and reward systems are the key to eliminating bias improving the forecast in the longer term.
And as we said at the beginning Forecast PRO is the place to start.
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