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Incorporating the Scenario into Your Forecast

If you have one of the many software systems available today that allows you to force seasonal, quantity, or per­centage changes to a product line or specific items, great. Now's the time to use it. If you haven't used it before, talk to your MIS Department and/or the software company to ensure that you understand how to use the feature. It may be helpful to try it in a simulation mode at first if one is available. If not, try the change on a small group or just a few numbers to make sure that all works as intended.

If you don't have a computerized system with these capa­bilities, you may require a bit more ingenuity, but all is not lost. Almost every system has some provision for all-inclusive group adjustments or maintenance to individual items only. But it does mean that you will have to use some thought to get the biggest bang for your buck.

If your system is the kind that only allows you to make adjustments to an entire group without the option to exclude non-promoted items, first determine if the items promoted represent a major portion of that group's volume. If so, go ahead and make the adjustment to the entire group, knowing that you'll be doing a lot less harm than good. And, who knows, many times promotions do bring in additional volume for non-promoted items. This is likely to be true if the program gives a price break or better terms for larger orders. It can also happen for reasons of pure convenience. For instance, you may stop at one particular store because batteries are on sale. While you're there, you might remember that you're low on toothpaste as well and pick up a tube while you're there, even if it's not on sale, rather than make another stop. Your customers may well be of a similar mindset.

If your system doesn't have the capability to adjust an entire product line, or if the items promoted represent only a small portion of that line's volume, you'll need to make adjustments to individual items. The key word here is practicality. If there are may more items than can be adjusted due to staff or time limitations, start with the items that have the highest volume. It may help to look at the history of those or similar items in past comparable promotions, and use what you've learned about the differ­ences to revise as many items as practical. Do as many as you can and remember that getting most of them, or even some of them done is much better than taking no action at all.

Now that we're talking about individual items, on to the second theme of this paper.

Never Rely on Demand History Alone

This principle can be hard to stick to when your demand is showing a clear trend in one direction or the other, and your forecast isn't. It's even harder when the part is on backorder and you're under a lot of pressure to adjust it because of what is happening at the moment. Once again, the key is to understand what's driving the demand. Looks can be deceiving. Never adjust a forecast based on history alone. Ask yourself why the demand trend appears as it does. Once you've answered that question, you'll know what to do.

As an example, on each of my forecast/history records, I have a brief vehicle application for that part, such as "'86-'93 Taurus/Sable" or "1971 FIAT." Not much, but, in most cases, enough to tell me why the trend appears as it does. If the trend is going up on the Taurus/Sable part, I feel good about raising the forecast because they are popular cars, which may now be entering into their prime replacement period. I've answered why.

But if the demand is rising for the old FIAT, I've got some more investigation to do to answer why. I may check for order entry errors—if found, they confirm my decision not to raise. If there weren't any entry errors, I could check the catalog to see if another application has been found that would trigger a volume increase. If no changes were found, I'd check for backorder status. In my business, there exists what I call the "Now they've got 'em" syndrome. If we've been on backorder for a while, the demand "surge" may be driven by just a few mechanics checking with store after store to buy the same few parts. But of course, every store that was checked and missed the sale because they didn't have the part in stock will now order more! When the backorders ship, demand drops because "Now they've got 'em." But at least now I've been able to answer why, and will not have erroneously raised the forecast.

To be Continued