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Discovering the Forecast

<div id="content"><p tabindex="0">We have already learned that forecasting can be used to determine future needs.</p><p tabindex="0">Now it's time to learn how to prepare and run a forecast for materials.</p><p tabindex="0">In the following video, Julia first describes the prerequisites for running a material forecast. She then shows you how to maintain materials relevant to forecasting. She presents the different ways to start a forecast run and introduces the different forecast models and the forecast calculation. Finally, she summarizes how the forecast is used in planning.</p><div class="kalturaVideoLessonWrapper"><div aria-label="" class="kalturaVideoLessonContainer" data-testid="video" id="1_ojj7t3mn"></div></div><p tabindex="0">In the previous video, Julia explained how to maintain a material for which you want to run a forecast. She presented the different forecast models available:</p><ul style="list-style-type:disc"><li tabindex="0">constant model</li><li tabindex="0">trend model</li><li tabindex="0">seasonal model</li><li tabindex="0">trend-seasonal model</li></ul><p tabindex="0">She gave an overview of the forecast calculation. Finally, she summarized how the forecast relates to MRP.</p></div>

Prerequisites and Features of Forecasting

Using Consumption-Based Planning in SAP S/4HANA

<div><div>In this video you will learn how to maintain a material for which you want to run a forecast and get an introduction to the different forecast models available.</div><div>You will also get an overview of the forecast calculation and learn how to run a forecast. Finally, you will be given a summary of how the forecast relates to MRP.</div></div>

U8_L1_1.mp4

Hello again. So far, we have seen how forecasts are used to calculate future requirements in forecast-based planning. In this unit, we will examine how to prepare and execute a forecast, and we will recapitulate when and how forecast values can be used in material requirements planning. Let's start! What do you need to do before you can carry out a forecast for a material? To run a forecast for a material, the forecast parameters for the material must be maintained in the material master record. In addition, you can only run the forecast if historical consumption values exist for the material. The system automatically updates the consumption values when goods issues defined as consumption are posted. You can check and manually correct the consumption values. You can also manually enter historical consumption values as base values for the first forecast. If no historical data exists for a material, you can carry out the forecast with reference to the consumption values of another material or with reference to the same or a different material in another plant. Here is a screenshot of the Forecasting tab in the  Change Material app. The forecast parameters of a material are maintained at the plant level in the material master record. These parameters include the forecast model, the period indicator, the number of consumption periods required, and the number of forecast periods to be calculated. You can view or maintain the consumption values directly from here. You can run an individual forecast for the material here. You can then access the forecast values from here. We have just seen that we can run a single forecast for one material. Of course, we can also perform a forecast for all relevant materials. Typically, the total forecast is scheduled as a job to run periodically, for example, once a month. To do this, you can use the Schedule Material Demand Forecast Runs app. All forecasting models are available. Let's go through the four most common models. In the constant model, consumption values remain static over a long period of time. There are only small fluctuations from a constant mean value. In the trend model, consumption values increase or decrease over a long period of time. There are only small fluctuations from an increasing or decreasing mean value. In a seasonal model, consumption has periodic highs and lows that vary significantly from a constant average. In the seasonal trend model, consumption values have periodically recurring peaks and lows that deviate significantly from an increasing or decreasing average. You select a forecast model in the material master before running the first forecast. You can choose it manually, with or without additional system validation, or let the system select the optimal model based on consumption values. If the system cannot identify a pattern in the historical data, it will select the constant model. Then how are the forecast values calculated? Forecast values depend primarily on historical data and the choice of model. Selecting the forecasting model in the material master mecord also selects the formula used to calculate the forecast values. Depending on the model selected, certain parameters are required to calculate the forecast values, such as the basic and trend values for the trend model and, additionally, the seasonal indices for the seasonal model, these parameters are automatically calculated by the system during the first forecast run. This is called model initialization and must also be performed in the case of a structural break, that is, when the previous forecast model loses its validity. For forecasting models that use exponential smoothing, you can instruct the system to optimize the smoothing factors. Exponential smoothing gives more weight to recent consumption data. When the system is instructed to optimize the smoothing factors, it calculates several combinations of factors and then selects the one with the lowest mean absolute deviation, which measures the forecast accuracy. An ex-post forecast can further optimize the model parameters. What is this? The next post-forecast is a forecast for past periods that the system performs when historical values exceed the number of values required for initialization. The most recent historical values are predicted based on the older values. This forecast is then compared to actual consumption to optimize the model parameters. Now, let's have a look at how the forecast values are used in the planning process. Forecast results are only relevant for planning if the forecast indicator is set in customizing for the MRP type. And then, it depends on the MRP type how the system uses the forecast values in the planning process. Do you remember? In classic forecast-based planning using MRP Type VV, which is part of the compatibility pack and whose usage rights expire on the  31st of December 2025, the forecast values are the requirements values. And in the recommended alternative to traditional forecast-based planning, forecast values are converted to planned independent requirements. For reorder point planning, you can have the system calculate the reorder point and safety stock during the forecast run instead of entering them manually in the Material Master Record. This is called automatic reorder point planning. SAP S/4HANA provides the standard MRP types VM and V2 for automatic reorder point planning. The difference between MRP types VM and V2 is that V2 includes external requirements in the net requirements calculation. Here is a screenshot of the customizing of the MRP type VM. The forecast indicator is set and both the reorder point and the safety stock are to be calculated. Continue with the course. We have a couple of system demos where you will learn how to run a forecast and how to use automatic reorder point planning for a material. And I also have prepared a note explaining how the system automatically calculates safety stock and reorder point.