Statistical forecasts are always based on the presumption that "history is a good indicator of the future". When this premise is not true, and demand is changing rapidly, any automated forecast algorithm will find itself playing "catch up" as it responds to the changing demand.
The StockIQ forecast algorithm will start to adjust immediately when it sees changes in demand, whether they are large or small. The question is in how rapidly we will adjust.
In order to provide stable forecasts, StockIQ's default behavior is to evaluate the trend over as long a period as possible. By default this is a combination of your 6 and 12 month trends. If you enable the "Very Low" volatility, they are based on your 12 month trends.
This means that only 1 new data point will typically not make a big difference in your forecast.
Getting Quicker Reactions
There are a few things you can do to get quicker response from the StockIQ algorithm if you need it:
- Enable Current Period Prediction: This feature will allow StockIQ to respond sooner to changes in demand, since we will start projecting the total for the period before that period is over, and using that to inform the forecast.
- Change the StockIQ Algorithm Volatility: Higher Volatility settings cause StockIQ to look at the trend over shorter and shorter durations. This leads to higher responsiveness, at the cost of (you guessed it) higher forecast volatility and fluctuation.
- Enable Bias Detection: StockIQ's bias detection will look for us consistently under- or over-forecasting an item, and will adjust algorithm volatility automatically to correct this.
Getting Slower Reactions
Sometimes the StockIQ algorithm will react more quickly than you want. One example of this is when you have 6-9 months of slow sales on an item with very mild seasonality, and StockIQ will forecast this item continuing to decline due to that recent history.
Two approaches are sensible here:
- Update Seasonality Settings: You can force the item to use a highly seasonal profile, which may be appropriate
- Enable Very Low Volatility: If more stability to your forecast is what you're looking for, select the "Enable Very Low Volatility" checkbox, in which case SIQ will use that if appropriate, OR, you can specifically choose the Very Low volatility option from the Volatility checkbox.
- Add Events: If the algorithm is reacting quickly to recent months, but the recent months are unusually high or unusually low demand for some reason, you can create events to adjust as necessary as well. Events with negative quantity will provide a bump up to adjust for low sales, and positive events will adjust out an unusually large sale. See Events Overview
Manual Forecasts
Finally, if all else fails, don't forget that you can always set a short-term manual forecast for the periods in which you want to override StockIQ's numbers. StockIQ will always be generating it's statistical forecast in the background, whether or not you are having us apply it to your Operational forecast.
When you're ready, you can set the item back to Auto. Any items with manual forecasts set are visible in the Manual Forecasts Screen within the Forecast module.
Note that sometimes manual forecasts are the best response to take - see more in the What should I do when the Statistical Model does not look correct to me? article.