Forecasting Calc

Forecasting
Workshop
11/17/2003
SAP AG 2002, Title of Presentation, Speaker Name / 2
Background
What it is: A detailed presentation focusing on the Mathematical
methods of prediction that are standard in APO-Demand Planning.
It is based on the Functionality found in release 3.1.
Anyone interested in upgrading it to 4.0 ?
Overview of Forecasting in APO
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Univariate Forecast Basics
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History
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Univariate Models in APO Models in APO Models in APO Models in APO
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Forecast Error Analysis
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Master Forecast Profile Setup
Forecast Execution
Overview of the Forecasting Workshop
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What we will talk about today
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Elements of the Univariate Forecast
Actual Value
Basic Value
Trend Value
Seasonal Index
Length of Season
Initialization
Ex-post Forecast
Forecast
Parameters
Exceptions are models 13, 14, 35, 70, 80, 94
Actual Value
D
a
t
a

V
a
l
u
e
s
Past Horizon
Historical values used as the basis of the
forecast
Basic Value
D
a
t
a

V
a
l
u
e
s
Forecast Horizon
Basic Value - Controls Vertical Placement
1
2
2000
1000
Trend Value
D
a
t
a

V
a
l
u
e
s
Forecast Horizon
Trend - Slope of line
1
2
.75
-.75
Seasonal Index
D
a
t
a

V
a
l
u
e
s
Forecast Horizon
Seasonal index - Divergence from Basic Value
1.00
2.50
.25
Length of Season
D
a
t
a

V
a
l
u
e
s
Number of Periods in the Season
Typically = one year
Season
Initialization
Basic value, Trend value, Seasonal indices, and the Mean
Absolute Deviation are initialized.
Ex-post Forecast
An Ex post Forecast is a forecast run in the past for comparison An Ex post Forecast is a forecast run in the past for comparison An Ex post Forecast is a forecast run in the past for comparison An Ex post Forecast is a forecast run in the past for comparison
against historical values. The ex against historical values. The ex against historical values. The ex against historical values. The ex- -- -post forecast is used to measure post forecast is used to measure post forecast is used to measure post forecast is used to measure
model fit. model fit. model fit. model fit.
D
a
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a

V
a
l
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Future
Forecast
History
Initialization Ex-post Forecast
History Values
Forecast
Values
- Initialization length is dependent on the forecast model
- Ex-post forecast length is the history horizon less the
initialization horizon
Ex-post Forecast
The following Models do not generate an Ex The following Models do not generate an Ex The following Models do not generate an Ex The following Models do not generate an Ex- -- -post forecast: post forecast: post forecast: post forecast:
Manual forecast Manual forecast Manual forecast Manual forecast
Historical data adopted Historical data adopted Historical data adopted Historical data adopted
Weighted moving average Weighted moving average Weighted moving average Weighted moving average
Moving average Moving average Moving average Moving average
70 70 70 70
60 60 60 60
14 14 14 14
13 13 13 13
General Calculation
Basic(t), trend(t), seasonal(t)
=
Function(actual(t), basic(t-1), trend(t-1), seasonal(t-1s))
Forecast = Function(basic(t), trend(t), seasonal(t))
Trend Model Example Initialization & Ex-Post
Period 1 2 3 4 5 6 7 1 2 3 4
History 80 95 100 115 125 110 110
G - Basic Value 102
T - Trend 10.0
EX Ex-post
F Forecast
History Horizon Forecast Horizon
Basic Value
Initialization
Trend Initialization
Ex-Post
Forecast
Ex(t +i) = G(t) + i * T(t)
Where i = 1
Period 1 2 3 4 5 6 7 1 2 3 4
History 80 95 100 115 125 110 110
G - Basic Value 102 113
T - Trend 10.0 10.3
EX Ex-post 112 123
F Forecast
Trend Model Example Calculate New Basic and Trend
Trend Value T(t) = [ G(t) - G(t-1) ] + (1- )T(t-1)
10.3 = .3 [ 113 102 ] + (.7) 10.0
Basic Value G(t) = V(t) + (1- ) [ G(t-1) + T(t-1) ]
113 = .3 (115) + (.7) [ 102 + 10.0 ]
Ex-Post Forecast Ex(t +i) = G(t) + i * T(t)
Where i = 1
123 = 113 + 10.3
Period 1 2 3 4 5 6 7 1 2 3 4
History 80 95 100 115 125 110 110
G - Basic Value 102 113
T - Trend 10.0 10.3
EX Ex-post 112 123
F Forecast
Trend Model Example Calculation Repeated
Where i = 1
124 127
10.5 8.3
123 134 135
124
10.5
123 134
124 127 128
10.5 8.3 6.1
123 134 135
134
Forecast P(t+i) = G(t) + i * T(t)
Period 1 2 3 4 5 6 7 1 2 3 4
History 80 95 100 115 125 110 110
G - Basic Value 102 113 124 127 128 128
T - Trend 10.0 10.3 10.5 8.3 6.1 6.1
EX Ex-post 112 123 134 135
F Forecast 134 140
Trend Model Example Calculation Repeated
Where i = 1
Forecast P(t+i) = G(t) + i * T(t)
110
128 128 128
6.1 6.1 6.1
135
134 140 146
1
110
128 128 128 128
6.1 6.1 6.1 6.1
135
134 140 146 152
2
Model parameters
The model parameters, Alpha, Beta, and Gamma, control the
weighting of each historical values.
Alpha is used in the basic value calculation
Beta is used in trend value calculation
Gamma is used in the Seasonal index calculation
The value for the parameters range from 0 to 1. A higher value will
place more emphasis on recent history.
The parameters also control how reactive the forecast is to changes in
historical patterns.
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3
3
4
4
4
5
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5
Univariate Forecasting Models
Constant Models Constant Models Constant Models Constant Models
Moving Average Models Moving Average Models Moving Average Models Moving Average Models
Trend Models Trend Models Trend Models Trend Models
Seasonal Models Seasonal Models Seasonal Models Seasonal Models
Seasonal Trend Models Seasonal Trend Models Seasonal Trend Models Seasonal Trend Models
Automatic Model Selection I and II Automatic Model Selection I and II Automatic Model Selection I and II Automatic Model Selection I and II
Sporadic Demand Sporadic Demand Sporadic Demand Sporadic Demand
Historical Data Model Historical Data Model Historical Data Model Historical Data Model
Linear Regression Linear Regression Linear Regression Linear Regression
User Exit User Exit User Exit User Exit
Constant Models
3 models within the constant model group: 3 models within the constant model group: 3 models within the constant model group: 3 models within the constant model group:
Constant Model (10) Constant Model (10) Constant Model (10) Constant Model (10)
1 11 1
st st st st
Order Exponential Smoothing (11) Order Exponential Smoothing (11) Order Exponential Smoothing (11) Order Exponential Smoothing (11)
Constant Model with automatic Alpha adaptation (12) Constant Model with automatic Alpha adaptation (12) Constant Model with automatic Alpha adaptation (12) Constant Model with automatic Alpha adaptation (12)
Constant Models follow the pattern: Constant Models follow the pattern: Constant Models follow the pattern: Constant Models follow the pattern:
Same Formula !
10 = 11
Constant Model 1
st
order Exponential Smoothing (10,11)
Use this model when there are no seasonal variations or trend Use this model when there are no seasonal variations or trend Use this model when there are no seasonal variations or trend Use this model when there are no seasonal variations or trend
patterns. Alpha parameter controls the weighting of history in patterns. Alpha parameter controls the weighting of history in patterns. Alpha parameter controls the weighting of history in patterns. Alpha parameter controls the weighting of history in
determining the basic value. determining the basic value. determining the basic value. determining the basic value.
Basic value and ex Basic value and ex Basic value and ex Basic value and ex- -- -post forecast are equal post forecast are equal post forecast are equal post forecast are equal
Higher alpha puts more weight on recent values Higher alpha puts more weight on recent values Higher alpha puts more weight on recent values Higher alpha puts more weight on recent values
Higher alpha makes the forecast more reactive to recent changes Higher alpha makes the forecast more reactive to recent changes Higher alpha makes the forecast more reactive to recent changes Higher alpha makes the forecast more reactive to recent changes in in in in
history history history history
Example of a Constant Model
Constant Model Automatic Adaptation of the Alpha factor
(12)
The system automatically adjusts the alpha factor based on the i The system automatically adjusts the alpha factor based on the i The system automatically adjusts the alpha factor based on the i The system automatically adjusts the alpha factor based on the initial nitial nitial nitial
alpha and the smallest tracking signal. alpha and the smallest tracking signal. alpha and the smallest tracking signal. alpha and the smallest tracking signal.
Moving Average Models
Two models are within the Moving Average group Two models are within the Moving Average group Two models are within the Moving Average group Two models are within the Moving Average group
Moving Average (13) Moving Average (13) Moving Average (13) Moving Average (13) -- -- -- -- the forecast equals the average of the the forecast equals the average of the the forecast equals the average of the the forecast equals the average of the
historical periods historical periods historical periods historical periods
Weighted Moving Average (14) Weighted Moving Average (14) Weighted Moving Average (14) Weighted Moving Average (14) the forecast equals the weighted the forecast equals the weighted the forecast equals the weighted the forecast equals the weighted
average of the historical periods. The weighting is defined via average of the historical periods. The weighting is defined via average of the historical periods. The weighting is defined via average of the historical periods. The weighting is defined via a a a a
weighting profile. weighting profile. weighting profile. weighting profile.
Period Weighting
-5 10%
-4 20%
-3 30%
-2 40%
-1 50%
Moving Average-Formulas
Moving Average-13 Weighted Moving Average-14
No ex-post forecast calculated
Trend Models
There are four models for data with trend: There are four models for data with trend: There are four models for data with trend: There are four models for data with trend:
Forecast with Trend Model (20) Forecast with Trend Model (20) Forecast with Trend Model (20) Forecast with Trend Model (20)
Holt Holt Holt Holt s Method (21) s Method (21) s Method (21) s Method (21)
Second Order Exponential Smoothing (22) Second Order Exponential Smoothing (22) Second Order Exponential Smoothing (22) Second Order Exponential Smoothing (22)
Trend model with Automatic Alpha Adaptation (2nd order) (23) Trend model with Automatic Alpha Adaptation (2nd order) (23) Trend model with Automatic Alpha Adaptation (2nd order) (23) Trend model with Automatic Alpha Adaptation (2nd order) (23)
Same Formula !
20 = 21
Holts Method (20, 21)
Basic Value Basic Value Basic Value Basic Value G(t) = V(t) + (1- ) [ G(t-1) + T(t-1) ]
Trend Value Trend Value Trend Value Trend Value T(t) = [(G(t) - G(t-1) ] + (1- )T(t-1)
Forecast value for period (t +1) Forecast value for period (t +1) Forecast value for period (t +1) Forecast value for period (t +1) P(t +i) = G(t) + i * T(t)
Formulas
Second Order Exponential Smoothing (22)
Encompasses a double smoothing method where the basic value of Encompasses a double smoothing method where the basic value of Encompasses a double smoothing method where the basic value of Encompasses a double smoothing method where the basic value of
the first calculation is used as the input for the second. The the first calculation is used as the input for the second. The the first calculation is used as the input for the second. The the first calculation is used as the input for the second. The result is a result is a result is a result is a
basic value that is more reactive to changes in demand while basic value that is more reactive to changes in demand while basic value that is more reactive to changes in demand while basic value that is more reactive to changes in demand while
minimizing the trend effect. minimizing the trend effect. minimizing the trend effect. minimizing the trend effect.
Trend with Automatic Alpha Adaptation (2nd order) (23)
This is the same as Second Order Exponential Smoothing except th This is the same as Second Order Exponential Smoothing except th This is the same as Second Order Exponential Smoothing except th This is the same as Second Order Exponential Smoothing except the e e e
systems determines the Alpha value. The minimum Alpha is 0.05 an systems determines the Alpha value. The minimum Alpha is 0.05 an systems determines the Alpha value. The minimum Alpha is 0.05 an systems determines the Alpha value. The minimum Alpha is 0.05 and d d d
the maximum is 0.90. The system determines the Alpha factor thr the maximum is 0.90. The system determines the Alpha factor thr the maximum is 0.90. The system determines the Alpha factor thr the maximum is 0.90. The system determines the Alpha factor through ough ough ough
an iterative processes of comparing the MAD to the Error Total ( an iterative processes of comparing the MAD to the Error Total ( an iterative processes of comparing the MAD to the Error Total ( an iterative processes of comparing the MAD to the Error Total (ET). ET). ET). ET).
(Same Method as Constant with Automatic Alpha Adaptation). (Same Method as Constant with Automatic Alpha Adaptation). (Same Method as Constant with Automatic Alpha Adaptation). (Same Method as Constant with Automatic Alpha Adaptation).
Trend Dampening Profile
As the historical values do not show a decrease in trend as the As the historical values do not show a decrease in trend as the As the historical values do not show a decrease in trend as the As the historical values do not show a decrease in trend as the market market market market
matures, a Trend Dampening profile can be used to smooth out the matures, a Trend Dampening profile can be used to smooth out the matures, a Trend Dampening profile can be used to smooth out the matures, a Trend Dampening profile can be used to smooth out the
trend. trend. trend. trend.
Seasonal Models
Seasonal Models are used to depict a Seasonal forecast or a recu Seasonal Models are used to depict a Seasonal forecast or a recu Seasonal Models are used to depict a Seasonal forecast or a recu Seasonal Models are used to depict a Seasonal forecast or a recurring rring rring rring
pattern, without any upwards or downwards slope. The pattern oc pattern, without any upwards or downwards slope. The pattern oc pattern, without any upwards or downwards slope. The pattern oc pattern, without any upwards or downwards slope. The pattern occurs curs curs curs
across its season or a number of Seasonal Periods (Usually across its season or a number of Seasonal Periods (Usually across its season or a number of Seasonal Periods (Usually across its season or a number of Seasonal Periods (Usually
recommended to be 12 Months). The trend value and Beta in this recommended to be 12 Months). The trend value and Beta in this recommended to be 12 Months). The trend value and Beta in this recommended to be 12 Months). The trend value and Beta in this
case are zero, signifying no upward or downward slope. case are zero, signifying no upward or downward slope. case are zero, signifying no upward or downward slope. case are zero, signifying no upward or downward slope.
Seasonal Models
There are three Models associated with the seasonal patterns. There are three Models associated with the seasonal patterns. There are three Models associated with the seasonal patterns. There are three Models associated with the seasonal patterns.
Forecast with the Seasonal Model (30) Forecast with the Seasonal Model (30) Forecast with the Seasonal Model (30) Forecast with the Seasonal Model (30)
Seasonal Trend based on the Winter Seasonal Trend based on the Winter Seasonal Trend based on the Winter Seasonal Trend based on the Winter s Method (31) s Method (31) s Method (31) s Method (31)
Season + Linear Regression (35) Season + Linear Regression (35) Season + Linear Regression (35) Season + Linear Regression (35)
Same Formula !
30 = 31
Forecast with the Seasonal Model (30)
This model uses first order exponential smoothing where both Alp This model uses first order exponential smoothing where both Alp This model uses first order exponential smoothing where both Alp This model uses first order exponential smoothing where both Alpha ha ha ha
and Gamma are assigned. and Gamma are assigned. and Gamma are assigned. and Gamma are assigned.
Season + Linear Regression (35)
Seasonal indices calculated
Seasonality removed from data
Forecast created using linear regression
Seasonality added back to forecast
Seasonal Trend Models
There are two Models for the Seasonal Trend method: There are two Models for the Seasonal Trend method: There are two Models for the Seasonal Trend method: There are two Models for the Seasonal Trend method:
Forecast with Seasonal Trend Model (40) Forecast with Seasonal Trend Model (40) Forecast with Seasonal Trend Model (40) Forecast with Seasonal Trend Model (40)
First Order Exponential Smoothing (41) First Order Exponential Smoothing (41) First Order Exponential Smoothing (41) First Order Exponential Smoothing (41)
Same Formula !
40 = 41
Also know as: Holt-Winters Method
And Triple Exponential Smoothing
First Order Exponential Smoothing (40, 41)
This Model encompasses the same Formula as 20,21,30,31 and uses This Model encompasses the same Formula as 20,21,30,31 and uses This Model encompasses the same Formula as 20,21,30,31 and uses This Model encompasses the same Formula as 20,21,30,31 and uses
assigned values for the Alpha, Beta and Gamma Coefficients. assigned values for the Alpha, Beta and Gamma Coefficients. assigned values for the Alpha, Beta and Gamma Coefficients. assigned values for the Alpha, Beta and Gamma Coefficients.
Auto Selection Models
Auto Selection 1 (50) Auto Selection 1 (50) Auto Selection 1 (50) Auto Selection 1 (50)
Test for Trend and Season (53) Test for Trend and Season (53) Test for Trend and Season (53) Test for Trend and Season (53)
Test for Trend (51) Test for Trend (51) Test for Trend (51) Test for Trend (51)
Test for Season (52) Test for Season (52) Test for Season (52) Test for Season (52)
Seasonal model plus test for Trend (54) Seasonal model plus test for Trend (54) Seasonal model plus test for Trend (54) Seasonal model plus test for Trend (54)
Trend Model plus test for Seasonal Pattern (55) Trend Model plus test for Seasonal Pattern (55) Trend Model plus test for Seasonal Pattern (55) Trend Model plus test for Seasonal Pattern (55)
Auto Model Selection procedure 2 (56) Auto Model Selection procedure 2 (56) Auto Model Selection procedure 2 (56) Auto Model Selection procedure 2 (56)
Same Formula !
50 = 53
Auto Selection 1 (50, 53)
Tests for Both Seasonal and Trend Patterns. Tests for Both Seasonal and Trend Patterns. Tests for Both Seasonal and Trend Patterns. Tests for Both Seasonal and Trend Patterns.
Seasonal Test: The Auto Correlation Coefficient is Calculated, t Seasonal Test: The Auto Correlation Coefficient is Calculated, t Seasonal Test: The Auto Correlation Coefficient is Calculated, t Seasonal Test: The Auto Correlation Coefficient is Calculated, the he he he
Pattern is determined to be Seasonal if the Auto Correlation Pattern is determined to be Seasonal if the Auto Correlation Pattern is determined to be Seasonal if the Auto Correlation Pattern is determined to be Seasonal if the Auto Correlation
Coefficient is Greater than 0.3. Coefficient is Greater than 0.3. Coefficient is Greater than 0.3. Coefficient is Greater than 0.3.
Auto Selection 1 (50, 53)
A Trend Significance test is carried out A Trend Significance test is carried out A Trend Significance test is carried out A Trend Significance test is carried out
If both are determined to be significant, a Seasonal Trend Model If both are determined to be significant, a Seasonal Trend Model If both are determined to be significant, a Seasonal Trend Model If both are determined to be significant, a Seasonal Trend Model is is is is
used. used. used. used.
If neither tests is determined to be Significant, then the Const If neither tests is determined to be Significant, then the Const If neither tests is determined to be Significant, then the Const If neither tests is determined to be Significant, then the Constant ant ant ant
Model is chosen as a default Model is chosen as a default Model is chosen as a default Model is chosen as a default
Test for Trend (51)
Used to Test only for Trend. Used to Test only for Trend. Used to Test only for Trend. Used to Test only for Trend.
This follows the Trend Significance test previously defined. If This follows the Trend Significance test previously defined. If This follows the Trend Significance test previously defined. If This follows the Trend Significance test previously defined. If no no no no
Significance is found then a Constant Model is Chosen. Significance is found then a Constant Model is Chosen. Significance is found then a Constant Model is Chosen. Significance is found then a Constant Model is Chosen.
Test for Season (52)
Used to Test only for Seasonal Pattern. Used to Test only for Seasonal Pattern. Used to Test only for Seasonal Pattern. Used to Test only for Seasonal Pattern.
This follows the This follows the This follows the This follows the AutoCorrelation AutoCorrelation AutoCorrelation AutoCorrelation Coefficient Test and Coefficient Test and Coefficient Test and Coefficient Test and choses choses choses choses the the the the
Seasonal Model if the value is above 0.3. If not a Constant Mod Seasonal Model if the value is above 0.3. If not a Constant Mod Seasonal Model if the value is above 0.3. If not a Constant Mod Seasonal Model if the value is above 0.3. If not a Constant Model is el is el is el is
chosen. chosen. chosen. chosen.
Seasonal model plus test for Trend (54)
Assumes Seasonal pattern exists and tests for Trend pattern. If Assumes Seasonal pattern exists and tests for Trend pattern. If Assumes Seasonal pattern exists and tests for Trend pattern. If Assumes Seasonal pattern exists and tests for Trend pattern. If a a a a
trend significance is found, then a Seasonal Trend Model is used trend significance is found, then a Seasonal Trend Model is used trend significance is found, then a Seasonal Trend Model is used trend significance is found, then a Seasonal Trend Model is used. If . If . If . If
no significance is found than a Seasonal Model is used. no significance is found than a Seasonal Model is used. no significance is found than a Seasonal Model is used. no significance is found than a Seasonal Model is used.
Trend Model plus test for Seasonal Pattern (55)
Assumes Trend exists and test for a Seasonal Pattern. If the Assumes Trend exists and test for a Seasonal Pattern. If the Assumes Trend exists and test for a Seasonal Pattern. If the Assumes Trend exists and test for a Seasonal Pattern. If the
Autocorrelation Coefficient is greater than 0.3 than a Seasonal Autocorrelation Coefficient is greater than 0.3 than a Seasonal Autocorrelation Coefficient is greater than 0.3 than a Seasonal Autocorrelation Coefficient is greater than 0.3 than a Seasonal Trend Trend Trend Trend
Model is used, if the Seasonal test is not found to be Significa Model is used, if the Seasonal test is not found to be Significa Model is used, if the Seasonal test is not found to be Significa Model is used, if the Seasonal test is not found to be Significant than a nt than a nt than a nt than a
Trend Model is used. Trend Model is used. Trend Model is used. Trend Model is used.
Summary of the Automodel 1 selection process
This shows the Model chosen under the following Conditions: This shows the Model chosen under the following Conditions: This shows the Model chosen under the following Conditions: This shows the Model chosen under the following Conditions:
Automodel If:Trend If: Season Then:Uses Model
40 - Seasonal Trend
20 - Trend
Yes
No
Yes by
Default
55 - Trend Model plus test
for Season
30 - Season
40 - Seasonal Trend
Yes by
Default
No
Yes
54 - Seasonal Model plus
test for Trend
30 - Season
10 - Constant
Yes
No
N/A 52 - Test for Season
30 - Trend
10 - Constant
N/A Yes
No
51 - Test for Trend
10 - Constant
20 - Trend
30 - Season
40 - Seasonal Trend
No
No
Yes
Yes
No
Yes
No
Yes
50 - Auto Selection 1
or
53 - Test for Trend and
Season
Auto Model Selection procedure 2 (56)
Tests for Constant, Seasonal and/or Trend models while attemptin Tests for Constant, Seasonal and/or Trend models while attemptin Tests for Constant, Seasonal and/or Trend models while attemptin Tests for Constant, Seasonal and/or Trend models while attempting to g to g to g to
minimize Error by adjusting Alpha, Beta and Gamma.. minimize Error by adjusting Alpha, Beta and Gamma.. minimize Error by adjusting Alpha, Beta and Gamma.. minimize Error by adjusting Alpha, Beta and Gamma..
This model adjusts Alpha, Beta and Gamma between the values of 0 This model adjusts Alpha, Beta and Gamma between the values of 0 This model adjusts Alpha, Beta and Gamma between the values of 0 This model adjusts Alpha, Beta and Gamma between the values of 0.1 .1 .1 .1
to 0.5 in 0.1 increments while calculating the Mean Absolute Dev to 0.5 in 0.1 increments while calculating the Mean Absolute Dev to 0.5 in 0.1 increments while calculating the Mean Absolute Dev to 0.5 in 0.1 increments while calculating the Mean Absolute Deviation iation iation iation
(MAD) for each Iteration. The iteration with the Lowest MAD is (MAD) for each Iteration. The iteration with the Lowest MAD is (MAD) for each Iteration. The iteration with the Lowest MAD is (MAD) for each Iteration. The iteration with the Lowest MAD is the the the the
Model chosen with the appropriate smoothing factors. Model chosen with the appropriate smoothing factors. Model chosen with the appropriate smoothing factors. Model chosen with the appropriate smoothing factors.
Comparision between 50 and 56 (Auto model 1 & 2)
Auto Selection Model 1 Auto Selection Model 2 Auto Selection Model 1 Auto Selection Model 2 Auto Selection Model 1 Auto Selection Model 2 Auto Selection Model 1 Auto Selection Model 2
Chooses Best Fit of Constant, Trend, Chooses Best Fit of Constant, Trend, Chooses Best Fit of Constant, Trend, Chooses Best Fit of Constant, Trend,
Seasonal, Seasonal Trend. Seasonal, Seasonal Trend. Seasonal, Seasonal Trend. Seasonal, Seasonal Trend.
If no Pattern Detected defaults Constant If no Pattern Detected defaults Constant If no Pattern Detected defaults Constant If no Pattern Detected defaults Constant
Model Model Model Model
Resource Intensive (Not Resource Intensive (Not Resource Intensive (Not Resource Intensive (Not
recommended for Production use) recommended for Production use) recommended for Production use) recommended for Production use)
Not as precise as Auto Model 2 Not as precise as Auto Model 2 Not as precise as Auto Model 2 Not as precise as Auto Model 2
Determines Best Fit through through Determines Best Fit through through Determines Best Fit through through Determines Best Fit through through
Iterative approach of adjusting Iterative approach of adjusting Iterative approach of adjusting Iterative approach of adjusting
smoothing factors (Alpha, Beta, smoothing factors (Alpha, Beta, smoothing factors (Alpha, Beta, smoothing factors (Alpha, Beta,
Gamma) and determining Smallest Gamma) and determining Smallest Gamma) and determining Smallest Gamma) and determining Smallest
Mean Absolute Deviation (MAD) Mean Absolute Deviation (MAD) Mean Absolute Deviation (MAD) Mean Absolute Deviation (MAD)
Determines Seasonal and Trend Determines Seasonal and Trend Determines Seasonal and Trend Determines Seasonal and Trend
Significance through Formulas for Significance through Formulas for Significance through Formulas for Significance through Formulas for
Auto Correlation (Seasonal Auto Correlation (Seasonal Auto Correlation (Seasonal Auto Correlation (Seasonal
Significance) and Trend Significance) and Trend Significance) and Trend Significance) and Trend
Significance Tests Significance Tests Significance Tests Significance Tests
The Croston Model (80)
The Croston Model (80) is used when demand is sporadic or The Croston Model (80) is used when demand is sporadic or The Croston Model (80) is used when demand is sporadic or The Croston Model (80) is used when demand is sporadic or
intermittent. The return is a Constant model to meet the possib intermittent. The return is a Constant model to meet the possib intermittent. The return is a Constant model to meet the possib intermittent. The return is a Constant model to meet the possible le le le
sporadic demand. sporadic demand. sporadic demand. sporadic demand.
Historical Data Model (60)
The Historical Data Model (60) allows you to use your Historical The Historical Data Model (60) allows you to use your Historical The Historical Data Model (60) allows you to use your Historical The Historical Data Model (60) allows you to use your Historical values values values values
as your forecast. as your forecast. as your forecast. as your forecast.
Manual Forecast (70)
The Manual Forecast (70) allows the planner to set their own val The Manual Forecast (70) allows the planner to set their own val The Manual Forecast (70) allows the planner to set their own val The Manual Forecast (70) allows the planner to set their own values to ues to ues to ues to
generate a forecast. The values chosen are all the values that generate a forecast. The values chosen are all the values that generate a forecast. The values chosen are all the values that generate a forecast. The values chosen are all the values that make make make make
up the forecast these are the Smoothing coefficients Alpha, Bet up the forecast these are the Smoothing coefficients Alpha, Bet up the forecast these are the Smoothing coefficients Alpha, Bet up the forecast these are the Smoothing coefficients Alpha, Beta, a, a, a,
Gamma (from the Profile) and the Basic, Trend value and Season Gamma (from the Profile) and the Basic, Trend value and Season Gamma (from the Profile) and the Basic, Trend value and Season Gamma (from the Profile) and the Basic, Trend value and Seasonal al al al
Index. This model should not be used for Background Processing. Index. This model should not be used for Background Processing. Index. This model should not be used for Background Processing. Index. This model should not be used for Background Processing.
No Forecast (98)
No forecast is conducted No forecast is conducted No forecast is conducted No forecast is conducted
External Forecast (99)
It is also possible to define your own Forecasting model if the It is also possible to define your own Forecasting model if the It is also possible to define your own Forecasting model if the It is also possible to define your own Forecasting model if the model model model model
you commonly use is not provided. The external Forecasting feat you commonly use is not provided. The external Forecasting feat you commonly use is not provided. The external Forecasting feat you commonly use is not provided. The external Forecasting feature ure ure ure
allows you to use ABAP to code your own forecasting model allows you to use ABAP to code your own forecasting model allows you to use ABAP to code your own forecasting model allows you to use ABAP to code your own forecasting model.
Trend, Seasonal, Seasonal Trend overview: Formula
Explanation of the Variables
3
3
3
4
4
4
5
5
5
Forecast Accuracy Measurements
Mean Absolute Deviation (MAD) Mean Absolute Deviation (MAD) Mean Absolute Deviation (MAD) Mean Absolute Deviation (MAD)
Error Total (ET) Error Total (ET) Error Total (ET) Error Total (ET)
Mean Absolute Percentage Error (MAPE) Mean Absolute Percentage Error (MAPE) Mean Absolute Percentage Error (MAPE) Mean Absolute Percentage Error (MAPE)
Mean Square Error (MSE) Mean Square Error (MSE) Mean Square Error (MSE) Mean Square Error (MSE)
Square Root of the Mean Squared Error (RMSE) Square Root of the Mean Squared Error (RMSE) Square Root of the Mean Squared Error (RMSE) Square Root of the Mean Squared Error (RMSE)
Mean Percentage Error (MPE) Mean Percentage Error (MPE) Mean Percentage Error (MPE) Mean Percentage Error (MPE)
Mean Absolute Deviation (MAD)
The Mean Absolute Deviation is calculated by the absolute differ The Mean Absolute Deviation is calculated by the absolute differ The Mean Absolute Deviation is calculated by the absolute differ The Mean Absolute Deviation is calculated by the absolute difference ence ence ence
between the ex between the ex between the ex between the ex- -- -post forecast and the actual value. post forecast and the actual value. post forecast and the actual value. post forecast and the actual value.
The Mean Absolute Deviation is the error calculation used to The Mean Absolute Deviation is the error calculation used to The Mean Absolute Deviation is the error calculation used to The Mean Absolute Deviation is the error calculation used to
determine the best fit in the Auto Model 2 Forecasting Model. determine the best fit in the Auto Model 2 Forecasting Model. determine the best fit in the Auto Model 2 Forecasting Model. determine the best fit in the Auto Model 2 Forecasting Model.
Error Total (ET)
The Error Total is the sum of the difference between the Actual The Error Total is the sum of the difference between the Actual The Error Total is the sum of the difference between the Actual The Error Total is the sum of the difference between the Actual and and and and
the Ex the Ex the Ex the Ex- -- -post forecast. post forecast. post forecast. post forecast.
Mean Square Error (MSE)
The Mean Square Error is the Average of the sum of the square of The Mean Square Error is the Average of the sum of the square of The Mean Square Error is the Average of the sum of the square of The Mean Square Error is the Average of the sum of the square of
each difference between the ex each difference between the ex each difference between the ex each difference between the ex- -- -post forecast and the Actual value. post forecast and the Actual value. post forecast and the Actual value. post forecast and the Actual value.
Mean Absolute Percentage Error (MAPE)
The Mean Absolute Percentage Error is the Average Absolute Perce The Mean Absolute Percentage Error is the Average Absolute Perce The Mean Absolute Percentage Error is the Average Absolute Perce The Mean Absolute Percentage Error is the Average Absolute Percent nt nt nt
Error between the Actual Values and their corresponding Ex Error between the Actual Values and their corresponding Ex Error between the Actual Values and their corresponding Ex Error between the Actual Values and their corresponding Ex- -- -post post post post
Forecast Values. Forecast Values. Forecast Values. Forecast Values.
Root mean Square Error (RMSE)
The Root Mean Square Error is the Square root of the average of The Root Mean Square Error is the Square root of the average of The Root Mean Square Error is the Square root of the average of The Root Mean Square Error is the Square root of the average of the the the the
sum of the squared difference between the Actual and Ex sum of the squared difference between the Actual and Ex sum of the squared difference between the Actual and Ex sum of the squared difference between the Actual and Ex- -- -post post post post
Forecast value. Forecast value. Forecast value. Forecast value.
Mean Percentage Error (MPE) Mean Percentage Error (MPE) Mean Percentage Error (MPE) Mean Percentage Error (MPE)
The Mean Percentage Error is the average percentage error of the The Mean Percentage Error is the average percentage error of the The Mean Percentage Error is the average percentage error of the The Mean Percentage Error is the average percentage error of the
difference between the Ex difference between the Ex difference between the Ex difference between the Ex- -- -post Forecast and the Actual values. post Forecast and the Actual values. post Forecast and the Actual values. post Forecast and the Actual values.
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Forecasting Calc

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