Short and sweet: Structural break 

Andreas Kemmner

In sales forecasting, a structural break is a sudden and significant change in the demand behaviour for an item. The cause of structural breaks is generally an abrupt change in market behaviour or in the behaviour of individual customers who represent a large part of the market demand. The critical point about structural breaks is that without further action, forecasts will only react with a certain delay, since for very few items a spontaneous significant change in demand can be immediately recognised as a lasting change.

Our hint:

An STU analysis helps to identify the risk of structural breaks in articles for which the main quantities are purchased by only a few customers. It shows the articles that are vulnerable to structural breaks.

In practice, many structural breaks are known in advance, but the information does not reach the responsible planners because sometimes no systematic communication channels are in place. When a major customer threatens to break away, it rarely happens out of the blue. If sales withdraw from a market, it is possible to prepare for the impending collapse in demand; provided people are informed. The same applies to positive structural breaks that spontaneously lead to significantly higher demand.

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

Andreas Kemmner

Autor | Author

Prof. Dr Kemmner has carried out well over 150 national and international projects in over 25 years of consultancy work in supply chain management and reorganisation.

In 2012, he was appointed honorary professor for logistics and supply chain management by the WHZ.

The results of his projects have already received several awards.

Weitere Beiträge | READ MORE