Use of forecast and history data in APO Extended safety stock calculations

[Former Member]

For the APO extended safety stock calculations, I know one can use history and forecast data to derive the MAD forecast error. What are the recommendations however for which forecast data to use:

- should it be for a consistent time lag? (for example a lag of two periods would be using forecast for period n made in period n-2)

- what should the lag be?

Any advice appreciated.

[Former Member · Accepted solution]

Hi

I think you want to measure the Forecast accuracy for your business scenario and this information you want use it for you safety stock calculation. I think is should be consistent time lag and this will be based on avg lead time you have for your products.

In our case (Pharma Industry) we have avg lead time of 45-50 days so we can take forecast for period n made in period n-3 for this calculation. So I think I will suggest check you respective businesses scenario and respective overall lead time.

Thanks

Amol