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Function documentationTrend Dampening Options for Exponential Smoothing Locate this document in the navigation structure

 

When performing forecast calculations, every now and then the system discovers a strong upward trend and, as a result, creates a very optimistic forecast. In reality, strong economical upward trends, for example, in sales or market share, do not last long. Therefore, if you use a forecast model with a trend component, you can have the system dampen upward trends according to your specifications.

Prerequisites

You are using a model with first-order exponential smoothing.

Features

You have several options available for dampening the rise of long-term trends:

Define Trend Dampening Profile

In a trend dampening profile, you can define the percentage by which the system is to dampen the trend for certain periods.

Specify Upper Limit for Trend Value (%)

The system takes this upper limit into account if you are using the Holt Method or the Holt-Winter Method (forecast strategies 20, 21, 40 or 41). The upper limit is the percentage, which you have defined, of the trend value based on the basic value. The upper limit has the following effect: after the trend value has been smoothed for a certain period during exponential smoothing, the system compares the quotients of the trend value and the basic value with the upper limit. If the trend value exceeds the upper limit, the system makes the trend value and the upper limit equal. This method also works for negative trends since the system considers the absolute value of the trend value.

Specify Upper Limit for Forecast Deviation from Basic Value (%)

This upper limit is taken into account for all methods of exponential smoothing and only has an effect on the forecast horizon. The upper limit is the percentage you have defined as the deviation of the forecast value from the basic value. In each forecast period, the system performs the following calculation:

(forecast value – basic value) / basic value

If the value calculated exceeds the upper limit, the system calculates the forecast value of the corresponding periods as follows:

maximum value x basic value / 100 + basic value

Specify Phi Parameter for Trend Dampening

The phi parameter has an effect both on the historical horizon as well as on the forecast horizon. You can use the phi parameter to effectively dampen the trend value of the forecast horizon in exponential smoothing. You enter a value for the phi parameter that is greater than 0 and less than 1. The smaller the phi parameter is, the more strongly the trend value will be dampened. If the phi parameter is 1, no trend dampening occurs.

For more information, see Trend Dampening with Phi Parameter.

Determine Phi Parameter Automatically

If you use automatic model selection procedure 2 (forecast strategy 56), the system can determine the phi parameter automatically. The system determines the best value from a range you have specified and also considers the increments you have specified.

Activities

You can make settings for trend dampening for the whole planning area.

The system then considers these settings for each univariate forecast that is performed in this planning area. If you want to use other settings for a certain forecast run, you can change the settings in the corresponding forecast profile.

To make settings for the planning area, on the SAP Easy Access screen, choose   Advanced Planning and Optimization   Demand Planning   Environment   Administration of Demand Planning und Supply Network Planning  . In planning area maintenance, choose   Extras   Forecast Settings  .

To make settings in the forecast profile, on the SAP Easy Access screen, choose   Advanced Planning and Optimization   Demand Planning   Environment   Maintain Forecast Profile  . Create a new master forecast profile or use an existing profile.

You make settings for reinitialization on the Univariate Profile tab in the Trend Dampening Settings area. If you choose the Use Trend Dampening Settings in Planning Area button, the system ignores the settings made here and takes into account the settings from the planning area.