In a nutshell: Structural break

In sales forecasting, a structural break is defined as a sudden and significant change in demand behavior for an item. The cause of structural breaks is generally an abrupt change in market behavior or the behavior of individual customers who account for a large proportion of market demand. The critical thing about structural breaks is that, without further measures, forecasts only react to them with a certain delay, as very few items can immediately recognize a spontaneous, significant change in demand as a lasting change.

Our tip:

An STU analysis helps to identify the risk of structural breaks for items where the main quantities are purchased by a small number of customers. It shows the sensitive articles for this.

A large number of structural breaks are known in advance in practice, but do not reach the responsible planners, as sometimes no systematic communication channels are in place. When a major customer threatens to break away, this rarely happens out of the blue. If the distributor withdraws from a market, you can prepare for the impending slump in demand, provided you are informed. The same applies to positive structural breaks, which spontaneously lead to significantly higher demand.

However, experience also shows that a good sales forecasting system reacts faster to both negative and positive structural changes than many human planners. So if you have had good experiences with your software-supported sales forecasts, you should trust the forecasting system in case of doubt instead of going against the system’s suggestions.

Picture of Prof. Dr. Andreas Kemmner

Prof. Dr. Andreas Kemmner

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