> For the complete documentation index, see [llms.txt](https://docs.pakk.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.pakk.io/suppliers-and-purchasing/demand-planning/concepts.md). # Concepts #### Historical Data Window By default, the demand planner uses as much historical sales data as it can to work out future predictions (with a limit of 3 years). Sometimes you may wish to shorten this window of historical data used so that only the most recent data is taken into account. For example, if more recent data is much more indicative of future performance because you have only just started selling a product, or a product has changed fundamentally, or trends and tastes have changed. You can set a default 'Historical Data Window (Weeks)' at account level, but can also increase/decrease on the fly while using the demand planner. #### Stock Cover The key concept to understand when approaching the demand planner is *stock cover*: the number of weeks of stock you would ideally like to be covered for for each item. Don’t make the mistake of thinking that this number represents the number of weeks of stock to order. The demand planner takes into account the stock you already have on hand, as well as what you might already have on order, so if you already have enough stock to get through the “stock cover” period, the demand planner won’t recommend you order that particular item. Your default number of weeks stock cover can be set at Account level, but you should think of the “stock cover” setting a knob to be twisted and tweaked as you do your demand planning. Don’t be afraid to increase and decrease it on the fly to shape the predictions created by the demand planner. #### Forecasting Strategy The demand planner uses a mathematical strategy (more details on that later) to calculate restocking levels. Different strategies try to balance the competing demands of ordering enough stock and minimising capital outlay in different ways. You can set your default strategy at Account level, but again, you should consider this another variable to be tweaked as you do your restocking. The strategies available are: * Avoid stockouts aggressively (95% CI, upper bound): The most aggressive strategy in terms of avoiding stockouts. Will tend towards significant overrordering. Recommended for most businesses that want to avoid stockouts and who are not too sensitive to capital outlay on stock. * Avoid stockouts (75% CI, upper bound): Tends towards a certain amount of overordering in order to avoid stockouts to a realistic level. Also a good balance for most businesses. * Balanced overstock (50% CI, upper bound): A slightly less aggressive approach to avoiding stockouts but still erring on the side of caution so will still lead to some overordering. Also a good setting for most businesses. * Average: Uses the weekly average as the ordering target. The most neutral strategy. Statistically leads to a stockout during the planning period 50% of the time. * Balanced under stock (50% CI, lower bound): Slightly more conservative than the average. High chance of stockout during the planning period. Only use this if stockouts are acceptable to your business or perhaps if your procurement time is short. * Minimise outlay (75% CI, lower bound): Minimise capital outlay at the expense of high chance of stockout. Not recommended for most businesses. #### Traffic Light Supplier Status One of the most prominent and loved features of the demand planner is the “traffic light” system - this is a sidebar consisting of a list of your suppliers, each with a little status indication dot that can be green, yellow, amber or red, corresponding to the urgency with which an order needs to be placed with that supplier. These traffic lights give you an at-a-glance overview of your stock status on a supplier-by-supplier basis. Of course, the stock status depends very much on the “stock cover” period you choose, so if you tweak that number, the traffic lights will change in tandem. #### Draft Orders The demand planner is a hard worker. As you tweak your “stock cover” period it recalculates draft orders for all your suppliers on the fly. On the home screen of the demand planner, you’ll see simple summaries of the draft orders that have been created for you. Again, notice how, as you increase your “stock cover” period, the draft orders get bigger, reflecting the fact that the demand planner is recommending you to buy more units. Draft orders are just that, a starting point from which you can create finalised purchase orders. To start working on an order, either click the supplier name in the traffic-light sidebar, or click on the “edit” icon on the draft order. \
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