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The business plan
In order to run any business, management will formulate an idea of the level of activity the business will be involved in. This will be relevant to the size of the premises, the facilities required and the number of people employed. It will involve macro forecasting together with an estimate of 'average selling prices' and 'unit costs' – relating to the output of generic product groups, whether they be numbers of cars, bathroom tiles or expressed simply in financial turnover term.
Demand forecasting and inventory management
When it comes to the manufacture and/or purchasing of individual parts and assemblies, a far more detailed forecast is required. Inventory management forecasting will need to accommodate the seemingly ever increasing variety of finished product options offered. Forecasting needs to be at the micro level to cover all the variant related items required. This means forecasting the sales of every variant product and must include any internal usage to support the sales of other finished products.
But, more than that, for it to be any use to inventory holding decisions, the nature of the forecast demand must be understood. For example, extraordinary demands should not be taken into the calculation of average usage – this would lead to inflated stocks. Indeed, such orders should not be satisfied from finished stock (even if they could be) for fear of decimating it and disappointing many other regular customers.
Averaging is not the answer
Simple average demand can also conceal underlying trends, seasonality or irregular demands, each of which would require a different approach to that needed for the control of regular demand products. Then there is the question of demand volatility; a product with a volatile history can hardly convert to a ‘flat’ weekly forecast by simple averaging. View inventory optimisation
For forecasting to be useful in a company with more than a few hundred product codes, it should include all of the features described above. Beyond that, it should allow manual intervention, as necessary, to accommodate market intelligence and planned promotions. It should also be capable of assessing its own attainment level, in light of orders received, and modify itself accordingly.
From a practical point of view, the inventory analyst should only need to get involved with exceptional cases, and so the forecasting software should highlight those products requiring attention. In our experience, we know that we can provide forecasting solutions that conform to this; over 90% products will look after themselves.
The solution
Micron has the solution. Our sophisticated software tools will address all the issues raised in forecasting and inventory management.
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Inventory Forecasting 
