What is composite forecasting in SAP SCM-APO-FCS - Demand Planning?

SAP Term: composite forecasting

• Component: SCM-APO-FCS

• Component Name: Demand Planning

• Description: Combines forecasts from alternative forecasting methods such as times series, casual, and/or judgmental for a particular brand, product family or product. Each forecast is based on the same historical data but uses a different technique. The underlying objective is to take advantage of the strengths of each method to create a single "one number" forecast. Either you can average the forecasts giving each one equal weight, or you can weight each one differently, or you can vary the weightings of each forecast over time. By combining the forecasts, the business analyst's objective is to develop the best forecast possible. The composite forecasts of several mathematical and/or judgmental methods have been proven to out-perform the individual forecasts of any of those methods used to generate the composite.

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• Key Concepts: 
  Composite forecasting is a demand planning tool within SAP's Supply Chain Management (SCM) Advanced Planner and Optimizer (APO) Forecasting and Replenishment (FCS) module. It combines multiple forecasting methods into one forecast, allowing for more accurate predictions of future demand. It also allows for the use of external data sources, such as weather or economic indicators, to further refine the forecast. 
  
  How to Use it: 
  Composite forecasting can be used to create a single forecast from multiple methods. This includes statistical methods such as exponential smoothing and regression analysis, as well as judgmental methods such as market research and expert opinion. The user can also incorporate external data sources into the forecast, such as weather or economic indicators. The user can then compare the results of the composite forecast to the individual forecasts to determine which method is most accurate. 
  
  Tips & Tricks: 
  When using composite forecasting, it is important to consider the accuracy of each individual forecasting method. If one method is significantly more accurate than the others, it should be given more weight in the composite forecast. Additionally, it is important to consider how external data sources may affect the forecast. For example, if weather data is being used, it should be taken into account when creating the forecast. 
  
  Related Information: 
  For more information on composite forecasting in SAP's SCM-APO-FCS Demand Planning module, please refer to SAP's official documentation at https://help.sap.com/viewer/product/SAP_APO_FCS/7.5/en-US