Move over Gordon Graham

by Neil Van Walbeck

Advanced demand forecasting is quickly becoming the standard for forecasting item usage for inventory management.

While Gordon Graham's inventory management concepts and practices revolutionized distribution, distributors using his methods have a much higher percent error rate when compared to system generated forecasts, often 200 to 600 percent off. Advanced demand forecasting takes forecasting to a whole new level by including item trends and more complete forecasting formulas. Together with real time processing and advanced concepts, advanced demand forecasting can reduce the error percentage to 30 to 60 percent, lowering inventories and increasing customer service levels.

Utilizing such features as trend percentages, advance demand forecasting patterns your items using demand categories, identifying them as level, slow, seasonal, trend, or erratic. The system then applies best fit algorithms in real time to formulate a demand forecast based on the item's demand category.

Earlier versions of seasonal set-ups only looked at year-old data. Current advanced demand forecasting tools look back to at least three years of history to better predict upward or downward swings.

The real benefit is that buyers can now focus on inventory that needs attention and better manage items as they see fit; such as following items that have been identified with a demand category trend, or setting those items identified as erratic with a fixed purchase method.

Other features of advanced demand forecasting allow buyers to set safety stock for an item using that item's service level, which results in lower inventory values, lower safety stock numbers, and better service levels for the customer.

More accurate forecasting can result in savings from lower inventory levels, reduced time spent on analyzing inventories by buyers, and a better understanding of inventories overall, that are staggering and can lead to significant competitive advantages for distributors.

Neil Van Walbeck is an application consultant for Activant. Find out more about Activant at http://distribution.activant.com/ or call 1-800-776-7438.