16 Mar Bucketed Forecast Consumption vs. Standard Consumption: A New Winner in the Race?
With the release of APO enhancement pack one (EHP1), SAP has provided customers with an alternate method of consumption to the standard “rolling window” approach that SAP has used to date. But is it something that your company should be utilizing? If your current forecast consumption process is locked down and operating as intended (in which case you should consider your company to be one of the lucky ones) then bucketed consumption may not be for you. If your company is seeing a lot of disparity around what the final forecast numbers look like compared to how the supply organization sees them, you might want to take a closer look at the bucketed forecast consumption functionality.
For those unfamiliar with the traditional method, the master data dictates how far forward/backward in time a sales requirement (based on the requirement date) can search to consume a forecast requirement. The consumption logic searches according to the value in the consumption mode (forward, backward, backward/forward, etc.), prioritizing those unconsumed forecasts that are closest to the sales order requirement date. Think of the sales order as a bomb (sometimes an easy picture to imagine…) whose blast radiates out from the point of impact but the blast waves dissipate at the consumption period boundaries.
The bucketed consumption method takes a slightly different approach to forecast consumption in that it sets up period-based consumption buckets from which the sales requirement can consume the forecasted requirement. A textbook example of this would be where your forecasters and sales departments typically operate in monthly buckets but your inventory/production planners typically operate in weekly buckets to get a better idea of capacity constraints. Dividing up the forecast into weekly buckets can seem like the right idea here, but with the way standard consumption works, a 100% accurate monthly forecast can look like it is less than 100% at the weekly level (see earlier blog).
|Business Scenario||Standard Consumption||Bucketed Consumption||Winner|
|Under Forecast||Has potential of forward consuming future period’s forecast, causing need for planners to adjust plan quickly||Does not allow forward consumption||Bucketed Consumption|
|Over Forecast||Would hold the requirement until it has drifted backward beyond the backward consumption period||Would hold the requirement until the month has ended||No clear winner depending on the standard consumption backward consumption period|
|Early orders (orders forecasted for next month but appear in the current month)||If the current month is fully consumed, forward consumption can handle this sort of activity by allowing requirement to potentially consume into the next period’s forecast||If the current month is fully consumed, this requirement would appear as though it is incremental demand||Standard Consumption|
|Late orders (orders forecasted for current month but appear in subsequent month)||If the previous month is not fully consumed, backward consumption can handle this sort of activity by allowing requirement to consume into the previous period’s forecast||If the previous month is not fully consumed, this requirement would appear as though it is incremental demand||Standard Consumption|
|Master Data Maintenance/Technical requirements||In order to work at optimal levels, standard consumption settings need to be re-evaluated on a regular basis and adjusted. Also the jobs that reorganize and deleted requirements in the past can get complicated.||Bucketed consumption settings can essentially be somewhat “set and forget.” All reorganization and delete jobs can consolidate to a single job and be scheduled at the end of the month.||Bucketed Consumption|
|Business alignment||Can cause confusion between sales/forecasting and planning/procurement as one plans with set buckets and the other with rolling windows||Aligns sales/forecasting and planning/procurement as they now plan in similar buckets||Bucketed Consumption|
And…Bucketed Consumption Wins by a Nose!
There is certainly nothing wrong with using the standard consumption settings, as long as your company has learned to manage these settings appropriately and update these settings frequently. It has been my experience that standard consumption tends to alienate the demand signal suppliers (sales staff, demand planners, etc.) from the demand consumers (supply planners, inventory planners, etc.) solely due to the differences in how the plans are consumed. It is for this reason that I believe that bucketed consumption can help align these groups, particularly in organizations where the forecast is generated in monthly buckets and then consumed in smaller buckets. Bucketed consumption is not without its own issues, however. It must be determined at the end of the month if the unconsumed forecast is merely missed forecast (forecast that will never come to be ordered) and deleted, or just order drift (i.e. forecasted early) and should be moved into the next time bucket. It also can’t really address issues where your order drift window is fairly large (i.e. where forecast and order it was meant for are very far apart). What it does is level the conversation so that when a sales/marketing/demand planner says, “the forecast is 1000 units for the month of May,” the sales planner is able to see that same information on the planning side and can plan accordingly. And having the demand and supply teams seeing eye-to-eye is usually a very good thing indeed.