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Forecasting Basics

How To Best Remove Forecast Bias From A Forecasting Process

Executive Summary

  • Removing forecast bias is a politically complicated endeavor.
  • We cover how to do it.

Introduction

Forecast bias is distinct from forecast error and is one of the most important keys to improving forecast accuracy. To understand what it is, see the article How to Understand Forecast Bias. In this article, we will address how to address forecast bias...

How Accurate is DDMRP’s Explanation of Forecasting?

Executive Summary

  • A big part of DDMRP is its proponents stating that critics don't understand DDMRP.
  • In this article, we analyze what a DDMRP proponent has to say about forecasting.

Introduction

The following article, Forecasts, one of DDMRP's best friends, was shared on LinkedIn and was written by David Villalobos on July 16, 2020.

See our references for this article and related...

How Do You Calculate a Forecast?

Executive Summary

  • Calculating a statistical forecast is far more straightforward to create than is often thought in practice.
  • We cover the calculation of the forecast and what it means.

Introduction

How do you calculate a forecast is a common question that we receive. Because statistical forecasts, in developed countries at least, are generated by systems, it is easy to get...

How to Best Understand Measuring the Unconstrained Forecast

Executive Summary

  • A constrained forecast is how most forecast error is measured.
  • We cover the importance of the constrained forecast error.

Introduction

The topic of an unconstrained forecast is one of the most poorly explained concepts in supply chain planning. In this article, we seek to illuminate this topic and also bring up its relevance for forecast error measurement. See our references for...

The Problem with POS Data for Supply Chain Forecasting

Executive Summary

  • POS information is often proposed to be used to improve forecast accuracy.
  • The evidence does not support that using POS does what vendors and consultants say it does.

Introduction to Using POS Data for Forecasting

Using POS data is a frequently proposed way to improve forecast accuracy. Software vendors that do demand sensing use it as a primary...

How to Understand What is an Outlier in Forecasting

Executive Summary

  • Outliers are easily identified in applications, but the question is how to deal with them.
  • The questions to ask regarding when outliers should be removed.

Introduction

The question of what is an outlier and outlier removal is always a topic of keen interest on forecasting projects, which is why it is helpful to have a specific outlier definition. In this...

How do Complex Forecasting Methods Stack Up?

Executive Summary

  • History shows some interesting insights as to complex methods.
  • There are frequent misunderstandings regarding forecastability, which leads to the misuse of naive methods.

Introduction to Complex Forecasting Methods

Selecting the right forecasting methods is a critical component of forecasting. You will learn why sophisticated forecasting methods tend to be overestimated and how to choose the right level of complexity.

See...

AI & ML Forecasting

What is Statistical Forecasting?

Executive Summary

  • A statistical forecast is a distinct way of creating a forecast.
  • We cover what it is and why they are called statistical.

Introduction

What is statistical forecasting is a common question.

See our references for this article and related articles at this link.

Most statistical forecasts, in developed countries at least, are generated by systems. They are the...

What is a Forecasting Method?

Executive Summary

  • Understanding a what is a forecasting method is critical to understanding statistical forecasting.
  • We cover how to differentiate a forecasting method from a model.

Introduction

The question of what is a forecasting method is a relatively common question around forecasting. For this article, we will limit our topic of statistical forecasts. See our references for this article and related articles at...

How to Get Around The Problems with Forecasting in SAP ERP

Executive Summary

  • Few companies use forecasting functionality in SAP ERP.
  • We cover how this functionality can be used by performing external forecasting analysis.

Video Introduction: The Infrequently Used Forecasting in SAP ERP

https://youtu.be/wQ-zaWfgSxw

Text Introduction (Skip if You Watched the Video)

For anyone focused on advanced planning, the forecasting functionality in ERP is so limited that there often seems to...

How to Understand Best Fit Forecast Model Selection

Executive Summary

  • We cover best-fit functionality in how it works and the implementation steps in best-fit.
  • Why the best fit historical accuracy is lower than generally proposed.

Video Introduction: How to Understand Best Fit Forecast Model Selection

https://youtu.be/Kxg8rIHJWUQ

Text Introduction (Skip if You Watched the Video)

Best fit forecasting is a procedure within most supply chain forecasting applications. It is a procedure that:
  • Compares...

Getting Around the US Government’s Fake Economic Statistics

Executive Summary

  • Why is a causal forecasting a missed opportunity?
  • How to get the right data for causal economic forecasting?

Introduction

One of the missed opportunities in forecasting I have discussed in the past is using macroeconomic trends to adjust forecasts. This type of adjustment would be performed at the top-level of the hierarchy, and in fact, could be done for all...

How to Make Sense of The Natural Confusion with Alpha Beta Gamma

Executive Summary

  • The jargon-heavy core statistical forecasting parameters known as “Alpha, Beta, and Gamma” could just as easily be called by the more descriptive names of “Base Factor, Trend Factor, and Seasonality Factor.” 

Video Introduction: Translating Alpha, Beta & Gamma

https://youtu.be/15vBSsI5trA

Text Introduction (Skip if You Watched the Video)

The jargon-heavy core statistical forecasting parameters known as “Alpha,...

The Missed Opportunity of Causal Forecasting?

Executive Summary

  • Causal forecasting is a method of forecasting based upon tying the forecast to a variable.
  • Causal forecasting is little used in statistical forecasting.

What Is Causal Forecasting?

Causal forecasting is forecasting one value by another value. There are various forms of complexity concerning causal forecasting. However, the most simple mathematical explanation is the following:

Forecasted Variable =...

Forecasting Statistically

What is Statistical Forecasting?

Executive Summary

  • A statistical forecast is a distinct way of creating a forecast.
  • We cover what it is and why they are called statistical.

Introduction

What is statistical forecasting is a common question.

See our references for this article and related articles at this link.

Most statistical forecasts, in developed countries at least, are generated by systems. They are the...

What is a Forecasting Method?

Executive Summary

  • Understanding a what is a forecasting method is critical to understanding statistical forecasting.
  • We cover how to differentiate a forecasting method from a model.

Introduction

The question of what is a forecasting method is a relatively common question around forecasting. For this article, we will limit our topic of statistical forecasts. See our references for this article and related articles at...

How to Get Around The Problems with Forecasting in SAP ERP

Executive Summary

  • Few companies use forecasting functionality in SAP ERP.
  • We cover how this functionality can be used by performing external forecasting analysis.

Video Introduction: The Infrequently Used Forecasting in SAP ERP

https://youtu.be/wQ-zaWfgSxw

Text Introduction (Skip if You Watched the Video)

For anyone focused on advanced planning, the forecasting functionality in ERP is so limited that there often seems to...

How to Understand Best Fit Forecast Model Selection

Executive Summary

  • We cover best-fit functionality in how it works and the implementation steps in best-fit.
  • Why the best fit historical accuracy is lower than generally proposed.

Video Introduction: How to Understand Best Fit Forecast Model Selection

https://youtu.be/Kxg8rIHJWUQ

Text Introduction (Skip if You Watched the Video)

Best fit forecasting is a procedure within most supply chain forecasting applications. It is a procedure that:
  • Compares...

Getting Around the US Government’s Fake Economic Statistics

Executive Summary

  • Why is a causal forecasting a missed opportunity?
  • How to get the right data for causal economic forecasting?

Introduction

One of the missed opportunities in forecasting I have discussed in the past is using macroeconomic trends to adjust forecasts. This type of adjustment would be performed at the top-level of the hierarchy, and in fact, could be done for all...

How to Make Sense of The Natural Confusion with Alpha Beta Gamma

Executive Summary

  • The jargon-heavy core statistical forecasting parameters known as “Alpha, Beta, and Gamma” could just as easily be called by the more descriptive names of “Base Factor, Trend Factor, and Seasonality Factor.” 

Video Introduction: Translating Alpha, Beta & Gamma

https://youtu.be/15vBSsI5trA

Text Introduction (Skip if You Watched the Video)

The jargon-heavy core statistical forecasting parameters known as “Alpha,...

The Missed Opportunity of Causal Forecasting?

Executive Summary

  • Causal forecasting is a method of forecasting based upon tying the forecast to a variable.
  • Causal forecasting is little used in statistical forecasting.

What Is Causal Forecasting?

Causal forecasting is forecasting one value by another value. There are various forms of complexity concerning causal forecasting. However, the most simple mathematical explanation is the following:

Forecasted Variable =...

Forecast Improvement

The Brightwork Forecast Model Assignment and Profiling Project

Executive Summary

  • Companies often have statistical forecast models assigned to product locations, but without knowing if the model assignment is up to date.
  • Model assignment also allows for the overall product database to be profiled.

Introduction

The statistical forecast model assignment is which statistical forecasting models apply to which product locations combinations. This does not mean that a statistical model is the...

How The Coronavirus Will Mean Massive Adjustments to Demand History

Executive Summary

  • Coronavirus is having an enormous impact on purchasing.
  • Companies need to perform adjustments on their demand history to account for Coronavirus.

Introduction

Coronavirus is an international pandemic that so far has had the following effects on demand.

See our references for this article and related articles at this link.

  1. A dramatic spike in many consumer items related to...

Test Results: Quarterly Versus Monthly Forecasting Buckets

Executive Summary

  • This test was performed to test a common proposal by customers that smaller forecasting buckets lead to higher forecast accuracy.
  • This test was performed with time-based forecasting disaggregation to enable an apple to apple comparison.

Introduction

It is common for companies to consider moving towards a weekly statistical forecasting bucket for supply chain management. I recently came upon a company...

How to Understand Test Results: Monthly Versus Weekly Forecasting Buckets

Executive Summary

  • This study was performed for a customer to verify a client’s hypothesis that weekly forecasting improves forecast accuracy versus monthly forecasting.

Why I Performed this Study

It is common for companies to consider moving towards a weekly statistical forecasting bucket for supply chain management. I recently came upon a company that had already moved towards weekly forecasting planning buckets.

See...

How to Estimate Production Forecast Costs Better Calculator

Executive Summary

  • Why quantifying procurement costs from forecast error and forecast accuracy is essential.
  • Separating the reasons for procurement cost variability and the production costs calculator.

Introduction

  • The background as to the overall topic of forecast inaccuracy cost estimation is explained in this article.
  • Conversely, what is the benefit of forecast accuracy? This article contains the calculator for one of...

How to Estimate Purchasing Forecast Costs Better Calculator

Executive Summary

  • Forecast error has a specific cost to procurement.
  • Why quantifying procurement costs from lower forecast accuracy is essential.

Introduction

The background as to the overall topic of lower forecast accuracy cost estimation is explained in this article. This article contains the calculator for one of the expenses associated with lower forecast accuracy, which is the cost of reduced premium...

How to Estimate Transportation Forecast Costs Better Calculator

Executive Summary

  • Forecast inaccuracy has a cost for transportation.
  • We quantify the cost of forecast inaccuracy with our expedited transportation costs calculator.

Introduction to the Quantification of Forecast Inaccuracy

The background as to the overall topic of forecast inaccuracy cost estimation is explained in this article. However, this article contains the calculator for one of the costs associated with forecast inaccuracy,...

Forecast Sales

Is Your Sales Rep a Sociopath or a Narcissist?

Executive Summary

  • The majority of salespeople fall into one of two categories. One is the sociopath and the second is the narcissist.

Introduction

Salespeople normally fall into two psychological profiles. If you have a sales rep, you are therefore most likely dealing with one of these two categories of psychosis.

Our References for This Article

If you want to see our references for this article...

What is a CRM Forecast?

Executive Summary

  • A CRM forecast is a forecast that is entered into CRM systems.
  • We cover what is rarely covered in the CRM forecast.

Introduction

Understanding the CRM forecast and its use is one of the most important questions around sales forecasting.

Our References for This Article

If you want to see our references for this article and related Brightwork articles, visit this <span...

What is Sales Forecasting?

Executive Summary

  • Sales forecasting is the signal given by individual salespeople to their management and that sales give to the rest of their company.
  • We cover how sales forecasting works typically in companies and their pitfalls.

Introduction

Sales forecasting is the forecast created by salespeople and sales organizations. It seems cut and dried. However, it is close to impossible to...

The Problem with Promotion Management Software

Executive Summary

  • Trade promotion management software is a problem because it increases the number of promotions but does not typically integrate into the forecasting system.

On Trade Promotion Management Software

Software vendors ranging from JDA to IBM to Junction Solutions make promotion management software, and this category of software is quite broadly implemented at CPG clients. These applications are singularly focused on...

Is Your CRM System Increasing Sales Forecast Error?

Executive Summary

  • CRM vendors state that their applications increase sales forecast accuracy.
  • We question this proposal by CRM vendors and ask for evidence.

Introduction

This article discusses one strong reason why CRM systems have such a problem earning a positive return on investment, which may be related to forecasting.

Our References for This Article

If you want to see our references...

A Frank Analysis of Deliberate Sales Forecast Bias

Executive Summary

  • Forecast bias is often discussed without stating how it is deliberate.
  • Sales forecasting, along with marketing forecasting, has the highest deliberate bias.

Introduction

Before writing this article, I spent time reading some of the many articles on sales forecasting right here on LinkedIn. Almost all of the articles I read were from people that most likely had...

Forecast Error

Why Do People Not Hold Others Accountable for Forecast Error?

Executive Summary

  • A major issue with forecast error is the lack of interest in measuring individuals.
  • We cover an instance of why this is.

Introduction

The problem with not holding people accountable for forecast error is proliferated both in companies and in societies. This article shows an example of this general distain for holding people accountable for forecasting...

How Can Forecast Error be Calculated?

Executive Summary

  • Several universally accepted methods calculates the forecast error.
  • After going over them, we will question if these methods are effective.

Video Introduction: How Can Forecast Error be Calculated?

https://youtu.be/-sA4f-sMnsc

Text Introduction (Skip if You Watched the Video)

The question of how can forecast error be calculated is a common question in forecasting. We go through all of the major and even some...

What is a Good Forecast Accuracy Percentage?

Executive Summary

  • A frequently asked question is what is a good forecast accuracy percentage.
  • We answer if there a real answer to this question.

Video Introduction: What is a Good Forecast Accuracy Percentage?

https://youtu.be/k3s_KLCTneI

Text Introduction (Skip if You Watched the Video)

Executives in companies typically want to know if their forecast accuracy percentage is what is a good forecast accuracy percentage. The standard...

What is the Definition of Forecast Accuracy?

Executive Summary

  • Forecast accuracy has a simple definition but many important details.
  • We cover the definition of forecast accuracy and its implications.

Video Introduction: Definition of Forecast Accuracy

https://youtu.be/W_R-qBZWmQo

Introduction

Understanding and measuring forecast error is critical to improving forecast accuracy but not many people actually understand how measuring forecast accuracy or forest error works. In this article, we will explain some of the...

How is Forecast Accuracy Measured?

Executive Summary

  • The forecast accuracy is measured by a number of universally accepted measurement methods.
  • After going over them, we will question if these methods are effective.

Video Introduction: How is Forecast Accuracy Measured?

https://youtu.be/iqftmX7iTqE

Text Introduction (Skip if You Watched the Video)

How forecast accuracy is measured is one of the most common questions in the field of forecasting. Forecast accuracy calculation is...

How Do You Explain Forecast Accuracy?

Executive Summary

  • Being able to explain forecast accuracy is essential to getting people to consider forecast accuracy important.
  • We cover the most basic way to explain forecast accuracy.

Video Introduction: How Do You Explain Forecast Accuracy?

https://youtu.be/v3zJ90CtzvM

Text Introduction (Skip if You Watched the Video)

The question of how do you explain forecast accuracy is a pervasive one. Forecast error is deceptively easy to...

Why is it Important to Understand Forecasting Error?

Executive Summary

  • Understanding and measuring forecast error is critical to improving forecast accuracy.
  • Forecast error is far less well understood than most people know.

Video Introduction: Why it is Important to Understand Forecasting Error

https://youtu.be/W_R-qBZWmQo

Text Introduction (Skip if You Watched the Video)

It is obviously important to understand forecasting error as it provides the necessary feedback to improve forecast accuracy eventually....

Brightwork Explorer

Next Steps for the Potential Customers Reviewing the Brightwork Explorer

Executive Summary

  • This page is designed to walk potential customers through the second process after Brightwork Explorer's demo has been viewed.
  • This article covers the sequence of things to do to get a sample data set to us.

Introduction

This page is for potential customers who want to go to the next step after receiving a demo and test the...

Brightwork Explorer and Intermittent Demand

Executive Summary

  • Common Question: Why Does Our Product Database Look Like a Service Parts Database?
  • Our reaction and the rising tide of unforecastability.

Introduction

Due to constant marketing pressure to grow the product database with new product introductions, demand histories are becoming increasingly intermittent.

Common Question: Why Does Our Product Database Look Like a Service Parts Database?

After analyzing many product databases from...

Brightwork Explorer Efficient and Easy Safety Stock Calculation

Executive Summary

  • The standard dynamic safety stock calculation does not work, yet it has been placed in most ERP systems.
  • We cover a far superior safety stock calculation in the Brightwork Explorer.

Are you losing your mind with safety stock calculation? You don't have to. You can now use our online tool with a better dynamic safety stock calculation that...

Brightwork Explorer Efficient and Easy Order Sizing Optimization

Executive Summary

  • There is a general misunderstanding of what MRP and external supply planning systems do.
  • What happens without order sizing and the results of misunderstanding systems regarding order optimization.

Introduction

Optimal order size depends upon factors that companies typically do not use to determine order size. One of these should be the fully loaded inventory and the ordering cost, and...

Brightwork Explorer and Constraining the Supply Plan

Executive Summary

  • Constraining the supply plan is a tricky endeavor.
  • We cover why a more fundamental approach to constraining can provide many benefits.

Introduction

Constraining the supply plan has a troubled history. The following issues have restricted the application of constrained supply planning in the industry.
  • The concept of containing the supply plan only exists in specializes supply planning systems. This means...

Get Access to Software From a Research Entity

Executive Summary

  • The Brightwork Explorer is one of the only software applications that was begun by a research entity.
  • This article covers the advantage of being based on this research focus.

Introduction

We are a fully functioning research entity focusing on SAP and supply chain planning. We can tell you how your supply chain statistics compare against other companies. We also are very...

Brightwork Explorer – How we Removed the Software BS Layer

Executive Summary

  • There is a tremendous amount of lying in software sales.
  • Brightwork eliminates this layer by not overselling what the Brightwork Explorer can do.

Introduction

A lot of software vendors have a layer of BS that is presented during the sales phase. We do not have this layer. First, our software is not based upon commitment or lock-in. Here are some of...