Forecasting New Items
New items are products that have been recently added to the range and have no sales history.
Our system automatically detects new items and builds a forecast for them. The system builds forecasts differently for the following types of new items:
‘New items for which analogues have been created;’
The system calculates their sales forecast based on sales data for similar products. When building a forecast, the system takes into account the influence coefficient of each of the analogues, which is set when adding a new item (adding analogues is described in detail in the New Items section).
‘New items for which no analogues have been created, there are no analogues and there is no sales history in the network;’
For such items, the system automatically finds items that are in the assortment matrix, have less than 4 weeks of sales, and do not have an analogue assigned to them. The system then forecasts them as the average item for the group, but taking into account the price of the new item (if it is assigned to the new item; if not, it is calculated based on the average value of the group). To do this, the system takes sales at the Group/Store level and divides them by the number of items in stock, then recalculates the group forecast taking into account the price of the new item and applies it to the new item.
‘New items for which no analogues have been created, but there is a sales history across the network;’
For such items, the forecast uses the so-called ‘Distribution Extension’. This option is used to more accurately forecast a new item for a store if this item has already been used in other stores in the region.
Distribution expansion is used if the historical sales for a new item in a store are less than a specified number of weeks (the number of weeks is specified in the forecast configuration file), but there are sales in the region; the system considers this item not as completely new, but as an expansion of the store's assortment.
For items that fall under distribution expansion, the forecast is calculated as a forecast for the item from the region and applied to the store using the following proportion: The Sales/Forecast value at the SKU/Region level is multiplied by the Sales/Forecast at the Group/Store level and divided by the Sales/Forecast at the Group/Region level.