The Importance of Product Segmentation

For demand forecasting of large numbers of products, demand planners need to consider segmenting brands and products based on their value to the company, the availability of data and information, and their forecastability. Forecast practitioners must assess and segment their product portfolio and apply the appropriate forecasting methods in conjunction with one another to achieve the optimal performance across the entire product portfolio. The topic of forecastability is becoming the focal point for many articles and research as companies are realizing that not all their products are forecastable, given the data constraints and variability in demand. As a result, companies are asking themselves what is forecastable and what is not, and how can they segment their products to get the most accuracy across their product portfolio.