Reviewing Seasonal Indexes
is critical for an accurate demand forecast. Seasonal Indexes, also called seasonal multipliers, are used to adjust the demand forecast by multiplying the product base forecast by a multiplier. The effect will raise or lower the demand forecast for the time period, often a week or month. The results are often used to help calculate the inventory needed to support sales. Holidays like Easter, seasons like springtime, and events like the Super Bowl that repeat based on some factor of time are frequently better serviced with a seasonal index applied across the year.
Problems with Seasonality
The problem with seasonality is that it can change each year, and your current fiscal year may not map back to your seasonal index. Sales from the last seasonal event may impact your base demand forecast to create inaccuracy. Easter is in a different month and fiscal week this year. How did you account for the differences when purchasing Easter inventory for this year? Next year, Easter is again in a different month and will be several weeks different from this year. Thanksgiving is a holiday that based on the time of year can add or subtract a whole weekend of December holiday shopping. There are two issues that need to be reviewed and adjusted: the current year fiscal week seasonal index values and the base demand forecast. Read more