Forecast Tree

Demantra

Theoretical EngineModels

Accuracy Metrics for Forecasts

Forecast Tree [1/2]

The forecast tree determines which item/location
aggregation combination the engine will forecast at. The
engine examines each level in the forecast tree and
validates if there is enough sales history data available
for forecasting or if the forecast generated have
sufficient accuracy at that level. In case the validation
fails, the engine moves on to next level and continue
with the validation phase until it finds a level where it
can generate a forecast. In case the engine ends up
forecasting at a higher level of aggregation in the
forecast tree, the forecast is split to the lower levels.

Forecast Tree [2/2]

Forecast tree is a system configuration that has a direct
bearing on the forecast accuracy. This is one of the first
setups that need to be done after careful analysis of the
sales history and after discussion with users.
The forecast levels should be meaningful to the
business users and it is recommended to have between
3 and 6 levels that the engine can traverse and
forecast. It is useful for the forecast tree to include the
level on which accuracy is measured, if possible.