D365 | SCM | Master Planning | Supply Forecasting

Abstract

Based on the historical sales transactions in D365, business users can apply planning tools and techniques to perform the forecasting for an item, item group, vendor, and vendor groups. Once the supply forecasting has been approved, the Finance team will be involved in the budget planning. The budgeting module will be used to generate the budget plan from the supply forecast.

Organizations usually perform the budgeting for the entire year, however, the forecasting can be performed for months. Based on historical sales, business users can create supply forecasts for the entire year. The supply forecast figures will be used to perform the budget planning for the next year.

The supply forecast enables business users to create and modify a plan for the items that must be purchased. Based on historical sales and customer orders, the supply forecast will help buyers what exactly they need to order for the next period.

D365 is offering two out-of-the-box solutions for planning your items, a Master plan(net requirements) and a Forecast plan(Gross requirements). Before going deep into this topic, we must know the difference between the master plan and the forecast plan.

Master Plan

The Master plan calculates net requirements. It is based on actual current orders and enables companies to control inventory replenishment on a short-term, day-to-day basis. Another term to describe it is the?Net requirements plan.

Forecast Plan

The Forecast schedule calculates gross requirements. It is based on future projections (or forecasts) and enables companies to conduct long-term planning of materials and capacity

Business Case:

I was working on a project for the Retail sector, where I need to demonstrate the Supply Forecast process available in D365. The buying head is responsible to perform the supply forecast based on last year's historical sales. The historical sales transactions are available in the system and business users are willing to know how the supply forecast will work in D365 SCM.?

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.?

Supply Forecast Process Flow In D365

Below is the process flow diagram for the Supply Forecast in D365

Step by Step Process

Create an 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 the Supply forecast for the item

Business users especially buying heads 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 the unit "Days". Enter the end date and press ok.

• Method: Period
• Per: 30
• Unit: Days
• End: 30/06/2020

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 interval?

• 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, and 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 check 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 item "70001".

Press Ok.

In the below screenshot, Forecast planning is updated.

The next step is to validate the "Planned orders" available in the master planning module. The system has created three planned purchase orders.

The buying head can 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"?the system has maintained the reference for the Master plan "Forecast" along with the planned order reference number.?

The buying head can view the Gross requirements, from the purchase order

Conclusion & Recommendations?

• Forecasting?is making an informed prediction about placing an order.
• Separate forecast planning isn't supported with Planning Optimization. Therefore, the Current forecast plan setting on the Master planning parameters page has no effect when you use Planning Optimization.
• Using forecasting models such as determining to reorder points and economic order quantities can help ensure optimal inventory control.
• The buying head usually performs the supply forecast for the items and vendors based on 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 dimensions. This will help to analyze your supply chain transactions in the Trial balance(view by Financial Dimension) as well. However, never use your item master as one of your financial dimensions. The item level report you can always view from submodules(Sales, Purchase, warehouse, and Inventory).?
• If you think defining the supply forecast at the item level is a cumbersome process, you can select the item group or vendor group and then define the supply forecast.?
• Once you are 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. As per my experience, budget planning in D365 is not 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 have you identified in the process and how we can improve and optimize the overall solution in D365??

I hope you like the article, keep connected and?Walk the Talk.

Feel free to share your feedback in the comments section.?

Cheers,

Ali Danish?

ERP Microsoft D365FO Solution Architect | Corporate Trainer

M: +971554912688