- Whether an item can be forecasted at a reasonable forecast accuracy is called the forecastastability of the item.
- We cover the forecastability formula that we created.
The Forecastable or Unforecastable Formula
The formula I have developed is listed below. It certainly is not be used in a pure form for every company and should be adjusted per company. However, one can start by using it, and tune it by showing the results with a group of people with the domain expertise to provide input as to whether the results of the adjusted formula “seems” correct.
=IF(R-Square>0.7,”Forecastable”,IF(AND(R-Square>.15,Standard Deviation/Series Mean<3,Series Mean>3, MAD>Series Mean*0.333333),”Forecastable”,”Unforecastable”))
A forecastable/nonforecastable formula can be applied to roughly determine which product location combinations should receive more or less forecasting effort, which product locations should go on reorder points and a host of other factors that assist in supply planning