KC YONG

FORECASTING

Plan the sales,

Sell the plan !!KC YONG

KC YONG

What is Forecasting All About?

1. Predict how much of an article people will buy at a certain week

2. Always think the lead time (LT) ahead

Forecast today what is needed the LT ahead

Availability LT ahead

Lead time>5 weeks

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Maintain Forecast of a Selling Article• Prerequisites:

– We have a detailed sales history in the System. Both trend and reliability of the article are known factors.

• Decisions to be taken:– How are we going to expose the article? Sales jump (%), promotion (pcs) or are we

keeping it the same all the time?– If activities and sales steering, remember to always think lead-time ahead!

• Things that can happen to an existing article?– We have moved the article in the store, so that it becomes more/less exposed and

therefore more/less sales. – We have change the price on the article.– We have promoted the article in external marketing.– The article goes out of stock.– Sales decrease/increase without any conscious action from Sales.– Product dominance– Propping– Sales steering i.e price on product– And so on…..

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What Goes Into Your Forecast?

1. Last week sales (LWS)

2. Average weekly sales = AWS– Average weekly sales (weighted average of last week sales and AWS old)

3. Trend (Compare AWS new with AWS old)

4. Forecast (Trend & lead-time into consideration)– Which week to forecast– Sales forecast = EWS

5. Follow up

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Tool for maintaining forecast for an article• Critical forecast error report

– What is the Critical forecast error report?• It shows how well an article is behaving concerning the two

main factors, trend & reliability• The list only contains articles that are problematic equal to a

trend or reliability signal on a certain level

– What is a trend and reliability signal?• The trend compares the new AWS with the old AWS and gives

a signal if the trend is too steep. • The reliability compares the Expected weekly sales with the

Actual sales and give a signal if outside the tolerances. It is an indication of how good our forecast is compared to what we actually sell.

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Why work with Critical Forecast

• Minimize Shortages• Minimize Overstock• Enable automatic ordering

WHAT WE DO TODAY:We run order proposals on weekdays and check and

adjust the orders before we release them.On weekends and public holidays we are not

releasing any orders WHAT WILL BE THE FUTURE:

There will be no more ordering !!All Need calculations will be based on our Parameters in Navision and will be daily

OUR GOAL

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1. Forecast means planning the period which is the lead time ahead of today

2. The Forecast is the EWS not the AWS3. Adjusting AWS doesn’t mean adjusting actual sales4. Always compensate lost and over sales5. Moving a product has an impact on the forecast and

needs adjustment6. Be sure to have enough stock to cover a manual

freeze period which is longer than the lead time (e.g. Bite Back offer)

7. Be aware: Promotion qties registered in the periods before the actual activity, may create overstock

Performance indicators in forecasting• Forecasting trend signal

(Goal between 2-6%); Count the number of articles that has a trend signal

• Forecasting Reliability signal (Goal between 3-10%); Count the number of articles that has a reliability signal

• Number of articles with End Date Sales past

(Goal less than 50);Each of the cut off dates you will need to have less than 50 articles

• Stock for the last activity range (Goal = 0 i.e. Summer, Christmas) No stock in the store from the last activity

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Weekly Index

Weekly Index:• What is the weekly index?– The weekly index is the smoothed version

of the weekly sales budget

• What the weekly index does:– The weekly index is a part of the

expected weekly sales calculation

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Living & Dining wk 44-52

SALEwk 10-12

Bedroom wk 13-19

Kitchen wk 20-26

SALEwk 27-29

EHR wk 30-34

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This is not projection of actual sales but ratherwhen we want the stock to be in the store & at the same time avoid bottle neck

week weekly budgeted sales (RM)

budget - weekly index

Navision - weekly index

47 7,800,000 0.94 1.00

48 8,000,000 0.97 1.00

49 8,550,000 1.03 1.05

50 9,700,000 1.17 1.10

51 8,900,000 1.08 1.15

52 10,700,000 1.29 1.20

1 9,600,000 1.16 1.10

2 8,700,000 1.05 1.10

3 8,250,000 1.00 1.10

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If that’s not possible sell what we have

Plan the sales then sell the plan

Peak input…

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End at week 1 or 22 weeks before CNY

End at week 3 or 4Do not need to end early

How customer buy…Think about Delivery Bottle neck ...Think about last minute Product…

Not every article share the same Starting & ending…

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How … can we securethe “additional” quantity ?

The CPC way…we will use the tool “Promotion” to get all the additional quantity …When the projected sales are higher thanthe Weekly Budget Index can take care.

Promotions Promotion should be used when you plan any kind of activity or promotion that will increase the sales for not more than 8 weeks. Document : Reg. no: RET.LOG.003

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What we agree with Sales Team, inform SSS in piece(s)/metre(s) “Total expected quantity,

required weekly for promotion only”

This product is selling about 10 pcs every week now at the XX area,During week 47 to 52, I will place them at a hot spot… and I will sell …

Wk47: 25pcs,Wk48: 29pcs, Wk49: 32pcs,Wk50: 35pcs, Wk51: 30pcs,Wk52: 25pcs

Submit this information to SSS : Lead Time + 3 weeks

At week 46 (lead time 4 wks) 46+4=50, so it can only start key in for wk50…At week 46 (lead time 7 wks) 46+7=01, …

What SSS will do…

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Promotion and Sales JumpPromotion (Qty):• To be used when it is a temporary change in the sales pattern due to

activities or sales steering qty

Sales jump (%):• Could be used when it is a continues change in the sales pattern

Weeks1 2 3 54 6 7 8 9 1110 12 13

10

30

50

qty

Weeks1 2 3 54 6 7 8 9 1110 12 13

10

30

50

What if …KC YONG

100% More that projected ?….or it may sold out use Plan B…

*Plan B to cover 50% of the total selling period.For 8 week promotion…For 4 week use what we have…

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How All These Comes Together?REALLY EASY!

TREND

OUT OF STOCKCOMPENSATION

RELIABILITY

FREEZE

SALESJUMP AWS

WEEKLYINDEX

EWS

SAFETYSTOCK

INPUT FROM YOU

SYSTEMCALCULATED

PROMOTION

REPLACER ARTICLE

OVERWRITEAWS

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Report follow up

WHAT WHO WHEN

Critical forecast error report Sales Weekly

Item info list (Sales steering list) Sales Monthly

Business Area Top report (Top 20-30 list per HFB) Sales Monthly

Ordering Parameters information report Sales Weekly(report showing End Date Sales)

Service level report Logistics/Sales Weekly

Upcoming Shortage report Logistics/Sales Daily

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….Accurate Forecasting requires us to have a good working knowledge about

your business, not advanced degrees or

complex mathematics!

REMEMBER…….

To maintain accurate forecasts we have a system, but….

FEED IT RIGHT !!AND WORK TOGETHER!!

KC YONG

Average Weekly Sales is the heart of Item Period Sales

If you are not a doctor……… don't play with the heart!

KC YONG

Plan the sales,

Sell the plan !!