Microsoft Dynamics 365 SCM - Supply Forecasting

Hello Folks,

These are the Covid19 days and we are living quarantined life. And we all know in the time this too shall pass. 

Let's get back to this blog post and my agenda today is the business case regarding "Supply Forecast". 

Business Case:

I was working for a project in 2017 where I need to demonstrate one presales demo for Supply Forecast. The buying head is responsible to perform the supply forecast based on last year's historical sales. The historical sales transactions were in AX2012 and he is willing to view how the supply forecast will work in D365 SCM. 

Notes For Business 

• Forecasting is making an informed prediction about placing an order.
• Using forecasting models such as determining to reorder points and economic order quantities can help ensure optimal inventory control.

Proposed Solution

• D365 is offering the out of box functionality to perform the supply forecast. 
• Supply forecasts can be performed for an item, item group, vendor and vendor group. 
• Once you defined the supply forecast, you can use the forecast entry and define your budget plan based on the supply forecast. 

Step by Step Process

Create Item in the Released Product Form

Create an item in the released product form. Make sure to enter all the related information for an item. 

Define the default order setting

In the default order setting form, enter the default purchase, inventory and sales warehouse. These will be the default warehouses for the item at the time of purchase, inventory, and sales. 

Item Allocation Key

You can use an item allocation key to assign a percentage of an aggregate forecast to individual items or item dimensions. An aggregate forecast is made at the group level. This could be a forecast for an item group or an inventory dimension group.

Path: Inventory management > Setup > Forecast > Item allocation keys.

Define Supply forecast for the item

Business users especially buying head are responsible for item forecasting. They can define the supply forecast for an item, item group, vendor or vendor group. 

In the below screenshot I will demonstrate the process to define the supply forecast for an item.  

Path: Inventory management > Inquiries > Forecast > Supply forecast.

Supply Forecast Form

To define the forecast, select the forecast model to use and then specify the item plus the quantity or the transaction amount. We can also set up a time schedule for allocating the forecast quantity.

Select the Method "Period" and define unit "Days". Enter the end date and press ok.

Methods Allocating Forecast

Following options available to allocate the forecast transactions 

• None - No allocation takes place.

• Period - Use this method to forecast the same quantity per period. When you select this option, you use it along with the Per field where you specify a quantity, and the Unit field, where you select the unit of time.

• Key - The forecast is allocated according to the period allocation key that you specify in the Period key field. You can use this method when you want to take seasonal variation into account.

Unit

Unit of time internal 

• Days - Allocation corresponds to the number of days that you specify in the Per field.

• Months - Allocation corresponds to the number of months that you specify in the Per field.

• Years - Allocation corresponds to the number of years that you specify in the Per field.

Click the Inventory forecast button, the system will open the inventory forecast form. In this form, the business user can see the Forecast Type: Supply Forecast along with the quantity and the warehouse. 

In the below screenshot, the system has created the inventory forecast for the month of April, May, June with the difference of 30 days(as the unit selected is days) as specified in the Per field. 

Forecast Plan Setup

In the forecast plan setup form, make sure to enable the chek for "Include supply forecast". Also, select the forecast model and time fence in days. 

Generate Budget Plan from Supply Forecast

Once the supply forecast has been defined the business user can generate the budget plan from the supply forecast. In the budgeting module, we can use the out of box functionality to create a budget plan for the supply forecast. 

Run Forecast Plan

The next step is to run the "forecast planning" in the master planning module.

Select the forecast plan "Forecast" and filter for the item "70001".

Press Ok.

In the below screenshot, Forecast planning is updated.

Now go to plan orders form and check the planned orders. The system has created three planned purchase orders.

The buying head can either consolidate these three planned purchase orders and create one purchase order with different delivery dates. It's also possible to create three different purchase orders for all the planned orders. In both cases, the delivery dates will be the same as proposed by the system. 

Note: The master planning proposed these delivery dates as defined in the item forecast form. 

Consolidated Purchase Order Created from Planned Purchase Order

Approve and firm the planned purchase orders. I have created one PO for three planned orders, below is the screenshot. 

In the PO "line details> Product tab"  system has maintained the reference for the Master plan "Forecast" along with the planned order reference number. 

The buying head can view the Net requirement form in the PO lines

Conclusion & Recommendations 

• The buying head usually performs the supply forecast for the items and vendors based on the historical sales transactions. 
• The buying head can consolidate the sales transactions by item group and create the supply forecast at the item group level. 
• It's good practice to create your item group as one of the financial dimension. This will be help to analyze your supply chain transactions in the Trial balance as well. However, never use your item master as one of your financial dimensions. The item level report you can always view from submodules. 
• If you think defining the supply forecast at the item level is a cumbersome process, feel free to select the item group or vendor group and then define the supply forecast. 
• Once you done with the supply forecast based on historical sales transactions, always make sure to define the budget for the forecast.
• "Generate budget plan from forecast plan" is the out of the box functionality available in the D365 Budgeting module. However, budget planning in D365 is not very flexible and user friendly. Businesses usually prefer to plan the budget in Excel and finally upload the budget using "Budget register entry".    

Please don't hesitate to share your experiences in defining the supply forecast. What gaps you identified in the process and how we can improve and optimize the overall solution in D365? 

Cheers

Ali Danish

Microsoft Dynamics Solution Architect