Example: Average Parent Item

The sales history indicates that 60 percent of the bikes that you sell are 10 speed bikes and 40 percent are 15 speed bikes. Of the 10 speed bikes, 70 percent are blue and 30 percent are green. Of the 15 speed bikes, 80 percent are blue and 20 percent are green. You use these percentages to configure an average parent item.

The average parent bike will be:

• 60 percent 10 speed.

• 40 percent 15 speed.

• 42 percent blue 10 speed (70 percent of 60 percent).

• 18 percent green 10 speed (30 percent of 60 percent).

• 32 percent blue 15 speed (80 percent of 40 percent).

• 8 percent green 15 speed (20 percent of 40 percent).

You decide to manufacture or purchase at these percentages.

Summary forecasts are more accurate than detail forecasts. For example, a forecast for the total number of bikes that will sell in the next year is more accurate than a forecast for blue 10 speed bikes that will sell in the next year.

The forecast is based upon total bike sales history. This forecast is the summary forecast. The option percentages produce a production (or purchase) forecast for each of the options. This forecast is the detail forecast.