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Demand Planning and Forecasting Functional and Business Issues

Would ODP have been possible without the Internet?


Yes, but it would not have a fraction of its power. ODP is fully Internet based for two primary reasons: (a)
The Internet facilitates collaboration and online data entry including judgmental overrides, a key component of
demand forecasting; (ii) The Internet allows generation of user defined alerts based on exception and other
criteria, along with automatic email or other forms of notification as soon as exceptions (or other planner
specified criteria) occur. These alerts could be maintained by an individual planner, or a demand planning
administrator; (iii) The Internet enables data analysis and reporting capabilities using a fully functional GUI, but
with very limited computing complexity at the planners end.
What is the added value in Internet based collaboration?
The demand forecasting and planning process is indeed heavily dependent on refined statistical regression
and time series analysis, but over the years the value of global visibility, broad based collaborative planning, and
efficient assimilation from order entry systems and field personnel, have been observed to be key components of
the forecast process. Optimal ROI through inventory reduction could be achieved by accurate forecasts of key
value drivers, which in turn could be achieved by an optimal combination of statistical techniques and
judgmental overrides based on knowledge of the business process and future market conditions.
Judgmental forecasts, in the form of inputs or overrides from the field, often introduce large inaccuracies and
bias, as the final numbers are subjective. However, these are key components of the forecast process, as the
knowledge of sales, future events, and demand behavior tends to increase with a persons proximity to the field.
Statistical and time series models (which are unbiased for given data, but often inadequate models of reality) act
as complementary sources of information to judgmental inputs. To enable sound judgmental forecasts, global
visibility, ad-hoc data modification and forecast re-calculation capabilities, and an intuitive UI with very little
computing complexity on the planners machine, are the basic prerequisites.
The key value of the Internet based collaboration enabled by ODP can be realized during judgmental edits or
generation of forecasts, as inputs might need to be assimilated from multiple sources, vastly separated locations,
across multiple organizations within a company, cutting through various skill and knowledge levels, and also
from customers and possibly from automated systems like order entry. In addition, Internet based collaboration
also enables generation of ad-hoc, automated alerts and notifications, based on user defined exception criteria
like forecast accuracy. These in turn could prompt a knowledgeable user community to view and possibly edit
the forecasts and demand plans.
A fully Internet based collaborative planning system in conjunction with a best of breed statistical and data
manipulation engine realizes the enormous potential of Internet based applications like Demand Planning.
How does Internet based collaboration enhance ODPs Judgmental Forecasting capabilities?
In Version 1 of ODP, a demand planner could access the data assigned to him/her and choose to make
judgmental overrides to the baseline forecasts manually or through a wizard, all through the Internet over a
phone line. After information from individual planners have been assimilated through consolidation, a demand
planning manager could similarly choose to edit the overall forecasts in the shared database. Forecast ownership
is maintained through optional comments that stay on with the modified data or forecasts.
What is the level of completeness of ODPs Causal and (Univariate) Time Series Forecasting
Capabilities?
Please see the Statistics and Causal Forecasting Sections.
What is the high level view of the process flow for demand forecasting and planning?
Historical data from RDBMS Business Warehouses or Data Marts and customer and sales information from
OLTP systems are read into the APS integration point, called the Planning Server, which stores APS specific
data.
What are the various roles defined within ODP?
There could be four possible roles:

System Administrator: Responsible for RDBMS and computing administration. Abilities include database
and computing expertise.
Demand Planning Administrator: Determines the overall default settings for the demand planning system
from a deep understanding of the business process. Responsible for data assignment (and conflict resolution) to
individual demand planners, specification of the baseline forecast methods and forecast allocation rules,
selecting and setting defaults for the pre defined reports, invoking forecast consolidation after all data from
personal databases have been sent to the shared database. Qualifications of a DP Admin. include a thorough
knowledge of the business processes and forecasting methodologies.
Demand Planner: Responsible for analyzing and forecasting demand in the personal database, and for
submission of demand forecasts (corresponding to each scenario specified by the planning server) for his/her
segment of the data. The demand planner is assigned a segment of the shared data by the DP Admin., allocation
rules, default settings for pre defined reports, and generation of the baseline forecasts for each scenario are
already done before the demand planner looks at the data. The demand planner could generate forecast variants,
new custom measures and aggregates, and rotate, drill down or aggregate the data for his/her own convenience.
A demand planner is an individual forecaster, his qualifications include forecasting and data analysis abilities as
well as a good understanding of the business processes governing his/her segment of the data.
Demand Planning Manager: Responsible for the final forecast numbers for each scenario that are submitted
back to the Planning Server. Once the individual demand planners submit numbers from the personal to the
shared database for each forecast scenario, these are rolled up to obtain the final consolidated forecast by the
DP Admin. who invokes this consolidation process. The Demand Planning Manager looks at the consolidated
forecast for each scenario, and decides whether to accept or reject them. He could modify the numbers, or
choose to re-assign them to the individual planners through the DP Admin. The Planning Manager is expected
to be in overall charge of the planning and forecasting process, and fully responsible for submitting the forecast
scenarios to the Planning Server (for other components of the Supply Chain) or to higher level management, as
the case may be.
How are inputs from sources like sales read into the system?
Sales could choose to input the data in an RDBMS (or have someone do that), or input the data interactively
from the ODP screen.
There are two potential questions here:
(1) How would ODP read data from OLTP sources?: For Version 1 of ODP, all data must be read into ODP
from the APS Planning Server, which stores the data in Oracle RDBMS format. With substantial effort,
the APIs could be used to read data from non-APS RDBMS. For latter versions, it is planned to support
ODP as a stand-alone product also, and APIs will be provided for connecting to most RDBMS.
(2) Is there a way to enter or modify data into ODP interactively?: Yes, not just forecasts, but data could be
modified and entered by using the Modify Data button in the Worksheet UI. Since this is a fully
Internet based system, data could be entered or modified by multiple sources separated by distance,
time, and skill levels. This crucial process is Collaboration, which ODP fully supports.
What is the difference between a forecast scenario and a forecast variant?
A forecast scenario deals with a specific forecast situation. For example, scenarios could be differentiated by
the presence of constraints on forecasts, the aggregate level at which the forecasts are issued, the choice of a
forecasting calendar, and the source of forecasts like sales, marketing, budget etc. Forecast scenarios are
specified by the Planning Server, and corresponding forecasts must be sent back by ODP. Constrained forecasts
at different scenarios might rely on different metrics or might attempt to optimize different cost functions.
A forecast variant is two different forecast for the same quantity at the same aggregate level. For example,
Sales could have a Best Guess Forecast, and an Adjusted Statistical Forecast; while statistical forecast
themselves could be generated by the Holt-Winters model or a Linear Regression model. Forecast variants exist
only in the personal database of an individual demand planner, only one variant is submitted to the shared
database and rolled up (or, consolidated) to produce forecast numbers for a scenario that must be submitted
back to the Planning Server.
Do we finally get one forecast out of the system? If so, how?
Yes, the final outcome is a single forecast for any particular end user.

However, the final Sales forecast might be different from the final Manufacturing forecast. ODP provides the
capability to maintain, display, and report multiple forecasts.
A single forecast is generated from multiple forecast scenarios through Forecast Reconciliation (or
Consolidation). This process looks at the data at the aggregate levels in which they are provided for each
scenario, at the constraints (e.g., cell locking, aggregation rules) and generates the final forecast.
Simple Example: Consider statistical forecasts of individual products (adjusted by Product Managers) that
add up to $5 million by Product Category. A few of those forecasts could have significantly lower degree of
certainty (these data could be locked). Assume the Sales forecast for that Product Category is $6 million. The
demand planner decides, depending upon the companys constraints, what value between $5 and $6 million to
choose, depending on the costs associated with excess supply and lost sales. If he chooses $5.7 million, he then
allocates this back to each product level, where he could use the same allocation rules that he applied to the
statistical forecasts issued by each Product Manager, without modifying any of the data that has been locked
during the allocation. Thus the planner gets a single forecast at any aggregation level. The choice would depend
on the relative importance of the higher costs associated with surplus demand, and the costs due to lost sales
and customer dissatisfaction associated with stock outs. In mathematical terms, this process of balancing
opposing constraints is nothing but defining and optimizing a cost function, the demand planner does that
through his judgment. Thus, if the cost function changes in the real world (e.g., it becomes more important to
focus on not losing customers to the competition than reducing surplus costs), the forecast values change.
Could ODP issue weighted forecasts based on performance of individual forecasts on historical data?
No, Version 1 of ODP cannot generate weights for the planner. If the weights are known or calculated
elsewhere, new Custom Measures could be defined for calculating and reporting weighted forecasts.
How are constraints taken into account during forecast generation?
Forecast scenarios could be Unconstrained (meaning there is no restriction imposed on the forecast by
consideration like available resources, manufacturing capability etc.), or Constrained (meaning that the
forecasts must take hard restrictions into account). Typically, a constrained forecast could come from supply
chain optimization. For ODP, the baseline forecast for each scenario must be generated by the Admin., after
taking the constraints into account, if necessary. The typical flow would be in the reverse direction,
unconstrained forecasts from ODP would be used to drive the supply chain, which would in turn yield
constrained forecasts. In some situations, it might be advantageous to view, report, analyze or modify
constrained forecasts themselves using the tools provided by ODP.
Are constrained and unconstrained forecasts stored separately, or as variants of each other?
Yes, constrained and unconstrained forecasts could be stored separately as different forecast scenarios,
and not as variants of the same forecast that share the same forecast rules. Typically, one would look at ODP as
producing unconstrained forecast only, while the supply chain optimization component of APS would yield the
constrained forecasts.
Are lost sales opportunities identified, and is there a way to do demand filtering based on order
cancellation, lost opportunity, or surplus?
Not supported in ODP Version 1. For the first release , a partial solution could be achieved by defining
custom packages. This is often handled by the what is called the Poisson method. This feature might be included
in future releases.
Where and how is the demand consumed?
The demand planner uses ODP as a tool to look at and compare different forecast scenarios, and possibly
variants of the same forecast, and to generate one final forecast that best suites the needs of her organization.
These demand forecasts could be used to determine sales, order quantities, and for tactical, operational and
strategic planning. The forecasts could also be fed into a supply chain module for use by various organizations
like sales, marketing, procurement, operations, distribution and so on.
In APS, these demand forecasts from Oracle Demand Planning is used by ASCP (Advanced Supply Chain
Planning), Global ATP, and Manufacturing Scheduling, the other three components of APS.

How are Currency (a Measure in ODP terminology) Conversion rules generated, how are they rolled up
after conversion, is there any information loss during conversion, and how are (say) discounts factored in
while converting from Units to Sales $?
Currency conversion rules are generating by noting the average conversion (e.g., Average Price is used for
conversion from Units to Sales $). Discounts, for example, are not factored in during the conversion process.
However, a custom measure could be defined that calculates and displays Sales less Discounts.
It must be remembered that currency conversion is used primarily for display and reporting purposes. The
underlying ODP engine always converts it to one Measure (Units) for all calculations and mathematical
manipulations. Thus no information is lost during conversion. Roll ups are also done in terms of the one
Measure: Units. After rolling up and getting the number of Units at the required aggregate level, the number
could be converted back to any desired measure for reporting or display purposes.
Can ODP handle related products, or products that are in some way attached to another either as
components or as supplementary products, or in some other fashion?
In Version 1, not quite. These could be handled through a consulting solution by using the Product
dimension in a particular fashion, but even that might not be powerful enough for all applications (e.g., the
allocation weights for the attached products might not be modifiable by the user, or change based on ratios of
forecast quantities might not be possible). This feature might be added in a future release.
The sources of data that are used for forecasting are often themselves error prone. Could the final
forecasts take these errors into account?
See the section Statistical Forecasting Techniques and Implementation for an answer to this apparently
simple, but profound, question.
Does ODP list out the assumptions with the forecasts?
No. Assumptions exist in outlier detection, statistical modeling, and handling of errors and causality.
Does the system depict the relation of the final forecast with real quantities like price, profits, and
manufacturing costs?
The ODP system is a tool for the demand planner. The planner could choose to display and report only the
final forecasts and relate them to quantities like price and revenue mentally, or through sophisticated
mathematical equations. The planner could also choose to feed the forecasts into a supply chain management
system like APS, and relate them to manufacturing quantities directly. Finally, even with a stand-alone ODP
system, the planner could choose to breathe life into the forecasts by relating them to quantities that make sense
to the person who is viewing them. This depends on the use of the forecasts.
ODP does provide numerous ways to relate the forecasts to real quantities. The demand planner could
define Custom Measures and Custom Aggregates that relate to the problem the best. While the calculation
engines inside ODP always use Units, an average conversion factor could be used to convert those to Sales $. If
customer discounts are stored in the system, a new measure could be defined that is Sales less Discounts.
Constrained manufacturing forecasts could be generated, which in turn could be converted to manufacturing
costs. Simplistic profit and loss analysis could be performed at any level of detail by aggregating individual
costs and breaking down overall revenue. For detailed financial analysis however, sophisticated specialty tools
like OFA (Oracle Financial Analyzer) should be used.
Could Alerts and Notifications be generated on the fly, and could they be user defined?
Yes, alerts could be set up based on Exception and other criteria by the demand planner. Yes, they could be
set up on the fly in an ad hoc manner. An alert could be prompted to send notifications based on user defined
criteria (e.g., in the form of email) to a set of recepients specified in the alert.
Is Oracle Workflow integrated into ODP?
Yes, it is.
Can ODP deal with different types of calendars (Manufacturing, Gregorian etc.)?

Yes, multiple calendars could be defined and handled by ODP. Specifically, the Manufacturing Calendar (4
week periods, rolling to quarters and years) and the Gregorian Calendar (the normal calendar, usually with
business days differentiated) are two variations that the demand planner would typically use.
Could ODP generate simple rules from the data, or analyze the causes of failure of a forecast?
No, the demand planner must do that. These are research areas, and not supported in Version 1.
How much forecast-ability does data analysis or judgments have? Does ODP have any value?
Yes, forecasts are a necessity, and a small improvement could often imply substantial savings and enhanced
sales opportunities for a company. No, forecasts are often not very accurate, and the nature of the data (e.g.,
sparsity, high variability or sporadic behavior, effects of unknown causes) could preclude substantial
improvement in certain situations. A tool like ODP attempts to generate the best possible forecast given the data
and knowledge of causality available to the planner.

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