Automatic Smoothing of Sales History
The AGR Inventory product suite offers a non-standard workspace for the automatic smoothing of sales history. If you are interested in adding this workspace to your current set-up, please contact your AGR consultant for more information.
To improve the forecast and known demand, and decrease manual work AGR offers two types of automatic smoothing of sales history:
- Out-of-stock smoothing: The sales history is adjusted with the average sales during the periods where there are no sales because of stock outs.
- Promotional smoothing: For promotion periods the sales history is replaced with the average sales before promotions.
Out of Stock Smoothing
1.1 Definitions of stock-out period and default rules for smoothing
Several consecutive days are called stock-out period if:
- The stock during these days is zero or negative;
- No sales registered on these days;
- At least one sale transaction before the period.
The sales history for the stock-out period is adjusted with the average sales before the period.
In the example below, the first picture shows the stock-out period (September – October 2018) and the second picture shows out-of-stock smoothing (light green lines in September – October 2018) and how the smoothing affects the forecast:
By default, out-of-stock smoothing is applied only to active items and only original positive sales are taken into calculations. The adjusted sales for stock-out period is calculated based on the original positive sales preceding stock-out period.
1.2 Default out-of-stock smoothing parameters
There are several parameters which define how long stock-out periods should be, how far in the past to search for stock-out periods and how to adjust sales in stock-out periods. The description and default values for these parameters are in the table below.
The picture below shows the stock-out period (green lines) and the out-of-stock smoothing parameters used in calculations:
1.3 Possible Additional Rules
The rules below are either alternations or additions to default rules, and therefore are considered to be customization to the standard logic in AGR.
Here are the most common additional rules:
- Additional rules on which items be considered for or excluded from out-of-stock smoothing (for example, specific item groups or specific replenishment categories or specific locations, etc).
- MinimumStock parameter which will be the minimum stock limit below which items are considered to be out-of-stock. For example, often items are considered to be out-of-stock if the stock is equal or below 1. However, MinimumStock parameter applies to all items in out-of-stock smoothing, i.e. it is not possible to set different stock limits on individual items.
- Define whether manual sale adjustments should be used in out-of-stock smoothing calculations in addition to the original sales.
- Specify whether out-of-stock smoothing should be applied to several days after the stock-out period as well. In this case it is necessary to define the number of days after the stock-out period during which out-of-stock smoothing will be applied.
Promotional Smoothing
2.1 Definition, default rules and parameters for promotional smoothing
Promotional smoothing is similar to out-of-stock smoothing with the same rules and the same parameters. The only one difference is that promotion period (the start and end dates) is defined in ERP or Planner or any other customized table. Therefore, the parameters DaysBack and StopBridgeingAfterThisNumberOfDays (see Section 1.2. above) are redundant and not in use. The only parameters used in promotional smoothing are DaysBackToSearchForSales and DaysBackToCalculateAvg (see Section 1.2 above for additional information about these parameters and default values).
In the example below, the first picture shows the sales without promotional smoothing and the second picture shows promotional smoothing (pink lines) and how the smoothing affects the forecast:
2.2 Possible Additional Rules
The rules below are either alternations or additions to default rules, and therefore are considered to be customization to the standard logic in AGR.
Here are the most common additional rules:
- Additional rules on which items should be considered for or excluded from promotional smoothing (for example, specific item groups or specific replenishment categories or specific locations, etc).
- Define whether manual sale adjustments should be used in promotional smoothing calculations in addition to the original sales.
- Specify whether promotional smoothing should be applied to several days after the promotion period as well. In this case it is necessary to define the number of days after the promotion period during which promotional smoothing will be applied.