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Forecast accuracy analysis case study- demand planning applications |
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Forecast accuracy analysis: Case studyThe company distributes food, grocery and health and beauty products through a wide range of trade sectors. Each member of the extensive team of product managers is responsible for forecasting future demand of his or her product ranges. Because of the varying nature of the markets and distribution channels, the different demands of the manufacturing suppliers and the specific skills of the individual product managers, a large number of spreadsheet-based approaches to forecasting are employed. Forecast Solutions built a database containing historical demand and forecast data and carried out forecasting simulations over the recent history. A detailed analysis of forecast accuracy was carried out based on the statistical forecasting simulations and on the acheived accuracy from the existing system. The main forecast accuracy measurement method used was WMAPE - weighted mean absolute percentage error. It was demonstrated that in certain markets the current methods were not adequately dealing with the prevalent seasonal patterns and that statistical forecasting could potentially play a major role in improving forecast accuracy. In certain other markets with intermittent demand driven by deals, discounts and promotions, it could be seen that statistical forecasting on its own would not make a significant contribution in the forecasting process. As a result of the analysis it was possible then to lay down an outline specification for an improved set of methods and procedures for demand forecasting and planning, including an outline of the requirements for a potential forecasting software aquisition.
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