Items properties setting
Before you start working with the system, you will need to program an initial setup of the properties of items and groups. You will specify these settings just once. Thereafter, with further calculations, these settings will be applied automatically to calculate the recommendations and forecasts of each item.
To enter the settings, select the “Items” section above:
On the left you can see a tree of your items, and on the right, the settings for the items and groups.
There are three levels of settings (by ranking of action):
1) In the entire database as a whole (default name: “Item database”)
2) For the group (if the group icon is yellow, the settings are set to the parent; if green, then individual settings for this group have been entered)
3) For the product (if the icon is white, the settings are set to the parent; if it is gray with an asterisk, then the individual settings for this item have been entered)
In “Settings” you assign the same calculation methods to your selected group of products or a particular product as those applied to the product or all positions within the group, when you specify the group settings. When you specify the settings, the principle of “the individual is stronger than the group” applies. Thus, you can specify individual options for the entire group while specifying others for a specific group member.
When choosing an item or a group, you can easily see what settings have been applied to the position you have selected to the right in the panel.
To change the setting, select the item or group in the tree on the left and in the right panel click “Recalculate” if you are entering a new setting, or “Change” if you want to change an existing setting.
After changing a setting, you need to save it. If the setting has not been specified yet, the button will be called “Save”.
After making all the necessary changes, you need to recalculate the recommendations. Otherwise, all the recommendations will be calculated according to the previous settings. However, in daily recalculation, which occurs after the settings are changed, the calculation will be made according to the new settings.
1. Setting properties
The settings are divided into two subsections: General “settings”, such as the calculation methods and properties of the goods, and “seasonality.” Each parameter features a comment explaining why this option is needed. You can read the comment directly on the form by hovering your mouse over the question mark icon on the right.
The “Make calculations” setting can be turned on or off. If disabled, an analysis of the history of product sales will be conducted, but the recommendations will not be displayed. It should be used if there are still residuals of the given product and there is a sales history of the product available, but there are no plans to continue purchasing it (out of production, etc.)
Data Analysis. Selecting the analysis period, forecast horizon, and response time.
Specify the period, i.e. the date from which sales analysis should be conducted. It is preferable to specify a period long enough but within which no dramatic changes in the sales of goods have occurred (for example, a substantial rise or fall in sales due to a shift from one group to another). In this case it is better to specify the period that most accurately describes the current sales situation. The limit might not be shown. In that case, the lower limit will be calculated automatically according to the first movement of the product, i.e. revenue or expense. It is important to understand that the analysis is always performed based on the current time.
Below, in the setting there are 3 parameters affecting the “Forecast time” calculation (the period for which to produce an assessment of projected demand for the product – for further details, read in “Methods used and approaches”): “Preparation Time” time (e.g. time spent on operational expenses, including communications with the supplier, exchange of documents, etc., as well as the time spent by the supplier preparing the product and delivery); “Delivery” – this is an additional directory where you specify a delivery option, which is characterized by the time required for the item to arrive; and “Total”, which refers to the overall system response time as the sum of these two previous parameters.
Sales Base. The choice of which data the system is to analyze.
“Use sales orders” – By default, the system assumes that the reserved goods are available, i.e. it does not reduce the current amount of available goods (delta). This option regulates this approach: if activated, the system will assume that the reserved goods reduce the current balance in stock.
Keep in mind an order for the internal transit between warehouses is also considered a reserve.
“Use arrival orders” – A choice between whether to analyze data on goods ordered from the supplier (i.e. the order has been sent to the supplier), but have not yet come to the warehouse. In the analysis, the planned date of delivery is considered. If this is not specified, the product will be considered to be coming within a specific period.
Keep in mind that an arrival order is also considered an order for the internal transit between warehouses.
This is a special set of techniques that allows the system to remove strong historical outliers from sales that can greatly distort the forecast. Removing outliers will affect the sales forecast: do not use this option if your sales are rare and irregular.
“Remove outliers” – This option controls whether the system should clean sales of strong historical deviations that can distort the forecast considerably.
Below – “Method” – There are three methods of removing outliers in the system: “Removal”, which ignores all values ??outside the limits of the corridor; “Normalize”, which redefines outliers as normal values; “Recovery”, which is a composite of the first two options.
“Deviation” sets the corridor for the analysis of sales, while those sales that fall outside of this corridor are considered deviations and the system applies the selected method to them. The corridor is defined as a percentage deviation from the average sales for the selected period. The more uniform your sales, the narrower the corridor should be (50%). If you have unsteady sales that vary considerably, it is recommended to set a wider corridor (200%). A typical value is 80%.
Forecast –The choice of methods and parameters taken into account when forecasting future sales periods.
“Method” – The choice of analysis and sales forecast. You can choose from five methods (normal/average, TMA, SMA, EMA, BRT) with additional settings. The method can be chosen manually on your own based on these projections. Methods are located on a graduated scale according to the sales characteristics. For regular and steady sales, you can use a normal/average or TMA method; for occasional or rare sales it is better to use the EMA method, or, preferably, BRT.
The “Service level” is typical to the BRT method. It affects how many customers you are ready to serve unconditionally. The lower the level of service, the lower the stock and the more you will lose clients who will not be purchasing the quantity of goods they need. A typical value is 80 or 91% when we serve exactly 8 out of 10 clients but are not providing for excess stock for unusually large volumes.
“Use Hodrick-Prescott filter” switches on or off according to the updated forecast trend. The trend is based on the methodology developed by Hodrick and Prescott. Basically, in this option the system determines the trend dynamics, e.g. an increasing or decreasing trend and adjusts the forecast based on the direction and speed at which the trend deviates.
Here in the picture you can see that the trend is decreasing, therefore, to make a sales forecast you need to correct for a drop.
For the purposes of adjusting the trend, it should be noted that we use the following scale, which depends on the response time of the system and the forecast horizon (T):
– For T up to 30 days, the trend is measured in “weeks”
– For T between 1 and 3 months the trend is measured in “months”
– For more than 3 months, the trend is analyzed according to an “annual” scale
“Manual trend correction” – a coefficient set manually and based on which you can multiply the sales forecast. Thus, if you want to assume that your sales will grow by 30%, the ratio should be 1.3. The default is 1.
SAFETY STOCK – This is a certain amount of goods that you order and store for unforeseen contingencies (e.g. transport delays, a sharp rise in demand, etc. and so forth.).
“Method” – The system offers a choice of three methods to define the safety stock: 1) fixed or “fixed amount”, which is when you specify the exact amount of the goods that must remain in stock (this is taken into account in the Delta); 2) the “Standard deviation”, calculated according to the sales history: the more sales are “uneven”, the more safety stock will be offered; 3) “For days”, which indicates the number of days for which you need to have safety stock, with a specific amount of insurance reserve calculated based on the sales forecast generated. For more about the methods and principles of operation of this tool, please read the section “Methods used and approaches”.
“Number of days” for the “Fixed days” option –Here you set the number of days for which you need to have safety stock, with a specific amount of insurance reserve calculated based on the generated sales forecast. This time is actually added to the system turnaround time.
“Item amount” for the “Fixed amount” option – You must specify the exact quantity of goods that must remain in stock. This quantity will be taken into account in the analysis of the current status of goods in stock and deducted from the available balance (Delta).
“Safety stock factor” for the “Standard deviation” option – This adjustment factor will calculate safety stock. You have to use it in case you consider your safety stock to be “dynamic”. However, you do not need the full amount of safety stock to avoid an accumulation of excess goods. This is pertinent for sales for goods with irregular and highly varying demand.
Item properties – Logistical supply constraints.
For an item (or group of items), you can specify multiplicity. This is the minimum amount of items that can be ordered from the supplier. For example, if you sell cigarette packs (in single packs) and purchase block units of 10 packs each, the multiplicity of packs is 10. If the analysis of the system recommends you to buy 17 packs, how many do you order from supplier: 1 or 2 blocks (10 or 20 packs)? The multiplicity factor (the slider to the right) helps you make this decision. A factor of 0.6 means that all that is recommended beyond 16 packs is the second block unit, and all that is less than 16 packs is the 1st block unit. A factor of 0.9 indicates that a recommendation of 18 packs will be interpreted as one block unit, and 19 as two block units. A factor of 0.2 indicates that for 13 packs, two block units will be recommended, etc.
“Minimum order” offers a similar approach: in this case, if the system decides that it is necessary to order less than the specified minimum, the factor corrects this decision according to the rules specified above – to a larger (up to a minimum order) or lesser (down to zero) degree.
2. Seasonality properties
For each setting of item groups or individual items, you can specify your own seasonality of sales under the second tab:
The graph specifies the average monthly deviation in a given month relative to average annual consumption set to 0 or higher, with a default value of 1 (which means that monthly consumption is equal to the annual average); a value of 2 means that consumption in this month is twice the annual average; a value of 0.5 indicates that consumption during the month is half the annual average.
Seasonality can also be calculated automatically based on the sales figures for the previous year. To do this, the user presses the “Calculate” button. If there have been no sales for the previous year (the system will notify you), the user can specify the product number for which seasonality of sales will be calculated.
To do this, click “Select the item”, then open the selection window:
Select items by double-clicking the mouse. The system will calculate seasonality in the chosen item number.
For details on the use and method of calculation of seasonality, please read the section “Used methods and approaches”.
3. Substitute products (analogues)
The mechanism of substitute products (analogues) should be used if it is necessary to group a selection of products into one as analogues.
Working both with multiple products and single items allows you to organize the consistency between different products, combining their sales history, reserves and stocks. As a result, you’ll get the recommendations for supply of the items as a whole entity, rather than its individual components.
Situations where you should use this mechanism:
· replacing one product with another, and the new product is a full analog of the previous
· you do not need to analyze the specific sales of each individual item, but instead of the goods “as a whole”
· individual products are unique, but are analyzed as one product
To implement this mechanism, Mycroft Assistant allows you to combine several items into one analogue and work with it as a single entity.
You specify items as analogues just once, and in subsequent updates of transactions of items belonging to one analog, information will be updated automatically.
In order to start working with analogues, go to the “Items” section and in the right panel select the “Analogues” tab:
On the left you see a tree of items with the option to mark them, and on the right, a panel for creating and changing analogue items. Analogues already created in the item tree on the left are marked in bold font.
To create a new product analogue, you need to select a few positions in the item tree. The right panel displays the contents of the newly created entity.
After selecting all items that you want to add to a product analogue, you must choose the main item, which will be the “base” for a new analogue entity. The main item can only be selected from the existing list of items composing the analogue. The system will use the main item for searching and ordering, as well as filtering by vendor. It will also assign an item to the product group while prices for this item will be considered as the purchase and sales price of the entire product analogue.
After selecting the main product, the name will automatically fill for the newly created entity, but you have the option to change the name to something you deem more appropriate.
Once the name has been filled, click the “Create” button to confirm creation of the product analogue.
If you want to change the product analogue by adding a new item, deleting an existing item from the group, or changing the main item or the name of the product analogue, select the item in the tree on the left, and on the right panel click “Edit”.
If you want to change the product analogue, there are several available options:
Adding an item: just mark the items in the tree and they’ll be added to the product analogue. Separating newly added items from the previously specified items is quite easy. Items can be deselected by clicking the orange “x” on the right.
Deleting an existing item from the product analogue: simply click the “x” to the right of the item and its color changes to red. That the product will be deleted when you save the changes.
You can change the basic item and as well as the name of the entire product analog.
Click “Save” to confirm the changes you have selected.
To disassemble the entire product analog record, you will need to remove all the products that are part of it: choose the product analog, mark all the “X” next to each item within it, and save your changes.
Important: to calculate the recommendations, all the data of items included in the product analog will be interpreted as one unit. Thus, this data will be in the form of united sales, united stocks, reserves and goods in transit, while recommendations for the product analog will be calculated for the whole unit together.