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Reducing Forecast Requirements

Good evening.

I need your help in order to understand the issue of the forecast requirements reduction. Although I have searched and i have read from various resources, I am still not confident enough that I have really understood it. Fore example, at the "SAP Material Requirements Planning (PP-MRP)"

book I am reading (page 29):

"Features:

The forecast, which calculates future requirements using historical data, is carried out at regular intervals. This offers the advantage that requirements,  which are automatically determined, are continually adapted to suit current consumption needs. The forecast requirement is reduced by the material  withdrawal so that the forecast requirement quantity that has already been produced is not included in the planning run again."

So far, so good. What i understand is that system compares actual consumption with the forecast requirement and it adjust the requirement's

quantity accordingly. But, immediately bellow, at the same page, it reads:

"Reducing Forecast Requirements:  

Reducing forecast requirements by consumption:

If consumption is higher than the forecast requirements in the current month, then the system also  reduces future forecast requirements. 

Reducing current forecast requirements by consumption:

If consumption is higher than the forecast requirements  in the current month, then the system does not reduce future forecast requirements."

At this point, i am completely lost. Shouldn't be the other way round? If consumption in this month is higher than the requirements, shouldn't

system increase next month's forecast requirement? Why next month's forecasting requirement should be reduced?

I would really appreciate it if you could also point me to any further resources regarding requirements consumption you think would be useful to me,

since so far i had no luck in understanding it.

Best personal regards to all,

Nikos

replied

Hi Nikos,

I totally agree with DB49 on MRP type control on Forecast consumption. It explains the reduction of forecast as per SAP.

Are you referring to SAP library on forecasting ? I have found similar content there also and believe me its very confusing. After going through it again times I could understand the meaning.


The whole purpose of forecast is to predict future requirements. There are always fluctuations on demand (or consumption) and that's the reason we have smoothning of forecast so that our systems can adjust to change in demand. In SAP we have different forecast models (e.g moving average, trend, seasonal etc... and different control parameters / factors to calculate forecast. Again, historical data (consumption values) are the base of these calculations.

Now, when consumption is higher in current month, then new forecast "values" should increase for next month to cover the excess demand. otherwise demand will keep on increasing and forecast values for future months will keep on decreasing resulting in chaos in planning. Till here we both are in sync, now coming to your point,

Nikos Giannopoulos wrote:

"Reducing Forecast Requirements:

Reducing forecast requirements by consumption:

If consumption is higher than the forecast requirements in the current month, then the system also  reduces future forecast requirements.

Reducing current forecast requirements by consumption:

If consumption is higher than the forecast requirements  in the current month, then the system does not reduce future forecast requirements."

Here author is not talking about calculating new forecast "values" but the forecast "requirements" that are already created. For example lets say forecast run creates 50 for current month and 100 for next month. Now if the actual consumption happens for 80 quantity, then system will consume 50 from current forecast and 30 from next months forecast requirement, leaving on 70 for next month. Similar to consumption of PIRs.

This is just my understanding and could be different from author's or other users in community. Hope it helps.

Best Regards,

Rohit

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