Forecasting drives the business tasks of planning, replenishment, purchasing, and allocation.

As forecasts become more accurate, businesses run more efficiently by buying the right
inventory at the right time. This ultimately lowers inventory levels, improves safety stock
requirements, improves customer service, and increases the companys profitability.

1. In our country, challenge to creating accurate forecasts is predicting demand for items
with a limited sales history. The accuracy of time series forecasts is diminished when
short or sparse historical data is fed into the forecasting model. The Demand
Forecasting approach to this challenge is to generate forecasts at multiple levels of
data aggregation.
2. Future forecasts should be based on past demand. Unfortunately, retailers cannot
record demand, but instead record sales. These two figures can differ when inventory
drops to zero and there is demand, but no sales. To deal with this situation, there
should be a module that recognizes when sales might be lower than actual demand,
and adjusts sales values up to a level to a predicted level of where demand might have
been. Another situation when a retailer might want to adjust sales before using them
as proxies for demand in forecasting is when past sales were unusually high due to an
external event that is not expected to repeat.
3. It is a great challenge forecasting in a country like Bangladesh. Because several kinds
of uncertain reasons like political unrest, natural disasters and many other uncertain
reasons can hamper the forecasts. So the planner should forecast keeping this
condition in mind.
4. It is a great challenge to forecast demand for new products and locations for which no
sales history exists. You can model a new products demand behavior based on that
of an existing similar product for which you do have a history. Forecasts can thus be
generated for the new product based on the history and demand behavior of the
existing one. Likewise, the sales histories of existing store locations can be used as the
forecast foundation for new locations in the chain. This is crucial information.
5. In some industries an initial "order" may not be a firm order; in this case the certainty
of the order estimated subjectively or using an objective criterion will be useful
information. A particular view of order information we have found useful for
predicting demand is order quantity grouped by lead-time.
6. To enhance forecast accuracy with pricing and promotion information, a prerequisite
is a well-maintained and managed database of price and promotions corresponding to
historical demand information. This requires a disciplined process to capture the
information in a timely manner. Even more challenging is collecting and maintaining
historical data of competitors' promotions and price changes. Such information is
especially crucial in industries where products are of the commodity type.
7. In many industries, a product can be expected to have a life of at most one year. As is
customary, it can inherit older history from its predecessor product, which can in turn
inherit history from its own predecessor and so on. This means that in order to get,
say, two to three years history, we need a well-organized product map over time. At
this point in time, we have found that many organizations do not have such product
map data stored in a usable manner.
8. For ease of product management, most, if not all, organizations use a product
hierarchy. With a sizable number of products in its portfolio, organizations now have
a different product hierarchy every month. This presents at least two challenges.
First, we need to find a way to obtain the history of every node in this changing
hierarchy. For nodes representing individual products, we can use inheritance as
described. For nodes at levels higher than the individual products, we need to
"reconstruct" its history every time the hierarchy is used, based on the current children
of the node. This results in a complex data preprocessing step. Second, the historical
forecast made in the past no longer corresponds to the newly constructed history or to
the most current product hierarchy. It is not clear how we can obtain running statistics
of historical forecast errors. Subsequently, forecast monitoring becomes difficult.
9. Promotions, non-regular holidays, and other causal events create another significant
challenge to accurate forecasting. Promotions such as advertised sales and free gifts
with purchase can have a significant impact on a products sales history, as can
irregularly occurring holidays. Promote attempts to identify the causes of deviations
from the established seasonal profile, quantify these effects, and use the results to
predict future sales when conditions in the selling environment will be similar.


Recommendation:
Alert management is a feature that provides user-defined and user-maintained exception
reporting. Through the process of alert management, you define measures that are checked
daily to see if any values fall outside of an acceptable range or do not match a given value.
When this happens, an alert is generated to let you know that a measure may need to be
examined and possibly amended in a workbook.
The Alert Manager is a dialog box that is displayed automatically when you log on to the
system. This dialog provides a list of all identified instances in which a given measures
values fall outside of the defined limits. You may pick an alert from this list and have the
system automatically build a workbook containing that alerts measure. In the workbook,
you can examine the actual measure values that triggered the alert and make decisions about
what needs to be done next.