Forecasting is the process of making predictions of the future based on past and present data and most commonly by analysis of trends. In the paper, state-of-art methods and key challenges in demand forecasting for the pharmaceutical industry are discussed. Logistics companies calculate a baseline performance; modify it based on improvements, headwinds, and tailwinds; and create a new forecasting plan. Contact Us . 1. Before exploring machine learning methods for time series, it is a good idea to ensure you have exhausted classical linear time series forecasting methods. Unleash their potential. Classification of Forecasting Methods Forecasting methods can be classified as quantitative or objective versus qualitative or subjective depending on the fact if an explicit model forms the basis of the forecasting method. CONCLUSION As a result of still rising material, financial and information flows across supply chains of particular industries, the companies are increasingly realized to apply progressive logistics management methods to manage. 3 The foundation for accurate forecasting is the use of standard logistics estimation tools that analyze distances and usage hours (derived from the scheme of … We find the following six steps to be important for driver-based planning and monitoring for the coming year: Planning and forecasting without a reliable baseline represents the new way of working for almost all logistics companies. Survey method is one of the most common and direct methods of forecasting demand in the short term. It is a powerful forecasting method that may be used as an alternative to the popular Box-Jenkins ARIMA family of methods. Prediction is a similar, but more general term. There are different methods of forecasting that support your business objectives. Learn about Analytics may not yield perfect foresight, but they can help identify the underlying drivers—that is, the variables to track and build related insights around—that will most affect a business’s top line in 2021. With technology evolving, the logistics companies are looking ahead with automation and digitalisation with forecasting tools as it has the capability to boost operational efficiency, improve warehouse performance and adequately manage the predictive analysis. We will consider whether a trended method would be better for this series later in this chapter.) One thing that is definitely true is that budgeting and forecasting are both tools that help businesses plan for their future. A time series is a group of data that’s recorded over a specified period, such as a company’s sales by quarter since the year 2000 or the annual production of Coca Cola since 1975 Within these ranges, the operator identified a set of trigger points—a sudden drop in one variable was found, for example, to be a good predictor of a near-term fall in volumes—that could guide leadership decision making. ADVERTISEMENTS: Everything you need to know about the techniques of business forecasting. The intended audience is junior logistic planners and maneuver officers / noncommissioned officers working in logistic positions at the brigade combat team (BCT) level and below. tab. Good judgement based on data analysis 3. I’m just doing my rock’n’roll duty creating … Better near-term forecasts allowed teams to adjust spot prices as demand recovered in certain trade lanes, switch capacity quickly among lanes, and adjust bid price settings a month in advance. Demand Forecasting Helps a Healthcare Logistics Company Enhance their Demand Forecasting Ability by 80% – A Supply Chain Analytics Case Study by Quantzig Demand Forecasting Methods Demand forecasting is a systematic measure of the future demand for a service or a product. It is essentially a technique of anticipation and provides vital information relating to the future. What is the purpose of the forecast—how is it to be used? The post Logistics Technology Market Forecasting … Machine learning methods can be used for classification and forecasting on time series problems. Please click "Accept" to help us improve its usefulness with additional cookies. Abstract Purpose The research purpose is the assessment of the consideration of the forecasting techniques and its integration for supply chain planning and analytics. Logistics Technology Market Forecasting Under Uncertainty. forecasting in supply chain 1. ep john 2. all push processes in supply chain are performed in anticipation of customer demandall pull processes in supply chain are performed in response to customer demand Let us begin with some simple methods of forecasting. Exponential smoothing is a time series forecasting method for univariate data that can be extended to support data with a systematic trend or seasonal component. ADVERTISEMENTS: The following are the standard methods by which the forecasting of population is done: 1. LOGISTICS III CHAPTER 8 Forecasting Supply Chain Requirements Department of Transport and Supply Chain Management It belongs to the family of techniques that include methods such as Grass Roots, Market Research Panel, Historical Analogy, Expert Judgment, and Sales Force Composite. The Delphi Method of Forecasting The Delphi Method of forecasting is a qualitative technique made popular by the Rand Corporation. McKinsey COVID-19: Global Manufacturing & Supply Chain Pulse Survey, 2020. Other factors taken into consideration in make the final forecast are seasonal trends or 'events' trends. 3. Importance for Forecasting in Supply Chain Management. a third of companies reported facing material and other supply-chain shortages. Forecasting techniques are frequently used to measure and control these risks. Supply chain forecasting is a method companies use to reorder components and other materials that they need on a regular basis. Also, two or more forecasting methods can be adopted at a time by a business. Arithmetical Increase […] If you’d like to implement software with forecasting tools for your business, get in touch using our contact form. Likely scenarios and underlying business drivers inform forecasts modeled using these scenarios and drivers (Exhibits 4 and 5). The method of logistics planning depends also on the top management and the people who handle the operational requirement. Cite as. In addition, PLS is partnering with the summit as a sponsor to support this critical industry and all its members. Logistics Forecasting and Estimates in the Brigade Combat Team by CPT Michael Johnson and LTC Brent Coryell (Authors’ note: This article presents proven sustainment tactics, techniques, procedures, observations, insights, lessons-learned and best practices as observed by the observers, coaches and trainers (O/C/Ts) of collaboration with select social media and trusted analytics partners Press enter to select and open the results on a new page. Only if demand uncertainty is low and if demand contains clear patterns, forecasting techniques that can incorporate demand patterns outperform those that can not. This field has emerged as a most modern trend. Division of Industrial Marketing, e-commerce and Logistics Industrial logistics LICENTIATE THESIS EVALUATION OF FORECASTING TECHNIQUES AND FORECAST ERRORS WITH FOCUS ON INTERMITTENT DEMAND Peter Wallström Luleå, May 2009. Economy Based Forecasting. 1 McKinsey 2021 Budgeting and Strategic Planning Survey, September 2020. Forecasting techniques are frequently used … Last year from November 1 to December 31, retail sales exceeded $850 billion. The field of forecasting has progressed a great deal since the original M Competition, which concluded that “more complex or statistically sophisticated methods are not necessarily more accurate than simpler methods”, and over time, new methods have been proposed that have clearly proven to be more accurate than simpler ones. The uses in terms of logistics planning are why we’re here today. Examples of Demand Forecasting Demand Forecasting Methods. There are two types of forecasting methods, one is qualitative forecasting, and another is quantitative forecasting. 2.2. cookies, McKinsey_Website_Accessibility@mckinsey.com, Likely scenarios and underlying business drivers, Travel, Logistics & Transport Infrastructure Practice. Forecasting is an attempt to determine in advance the most likely outcome of an uncertain variable. The effect of forecasting techniques is assessed based on the impact the techniques have on the inventory level, not on a forecast accuracy measure. The qualitative forecasting method focuses on summative approaches for undertaking the forecasting process (Punch, 2013). A commonplace example might be estimation of some variable of interest at some specified future date. (There is a rise in the last few years, which might suggest a trend. For example, the data in Figure 7.1 do not display any clear trending behaviour or any seasonality. Driver-based forecasting is a more robust approach to modeling, has been beneficial in response to the COVID-19 crisis, and could lay the foundation of a new way of working. Effektbasierter Forecast. This method is often used when the forecasting of a demand is to be done for a short period of time. A postal operator’s financial planning and analysis team needed to understand how the pandemic and several underlying drivers might shape the organization’s volume and volume mix. These two processes generate the demand for logistic resources in the theater of operations. It first goes into the detail of a classification of distribution control decisions, the bigger framework underlying this article which can be used to select appropriate distribution control techniques. our use of cookies, and As opposed to most research on forecasting, the relation between characteristics of products, processes and markets on different types of forecasting techniques is investigated from a logistics … 30, 2020) – PLS Logistics Services, a leading third–party logistics provider, was selected to speak at the OCTG & Line Pipe Forecasting Summit on October 1-2, 2020. The methods have been assessed by forecasting the Run-of-the-River hydroelectric power plant energy for the year 2017. Sometimes called material forecasting or demand forecasting, the process of supply chain forecasting primarily involves recognizing a need for items and communicating it to the proper supplier. The steps and sequence of the inputs, the configuration of the methods, the repeating of steps, and the outputs all come together to form an algorithm. Eine weitere Methode ist der effektbasierte Forecast. Diese können beispielsweise der Markteintritt von Wettbewerbern bzw. McKinsey COVID-19: Global Manufacturing & Supply Chain Pulse Survey, 2020. Forecasting is an attempt to determine in advance the most likely outcome of an uncertain variable. If you would like information about this content we will be happy to work with you. Master Plan Method 8. These methods are so simple, they should not be called statistical. Geometrical Increase Method. Although the sector has rebounded from previous crises, the extent of uncertainty today means that forecasts for next year that are built on conventional models are no longer reliable. 154 Downloads; Abstract . People create and sustain change. This model was then used to shape the operator’s 2021 product mix and pricing strategy. Forecasting (ISSN 2571-9394) is an international peer-reviewed open access journal of all aspects of forecasting, published quarterly online by MDPI.. Open Access —free for readers, with article processing charges (APC) paid by authors or their institutions. Initiating all push–processes of Supply Chain: Forecasting is the starting point for all push-processes of Supply Chain like raw material planning, purchasing, inbound logistics, and manufacturing. Quantitative forecasting models can be further divided into casual and time series models. Never miss an insight. Something went wrong. A simulation model is presented, which is used to research the usefulness of forecasting techniques. Add yourself to get the latest updates from our blogs Yes add me to your mailing list. Demand Forecasting is a process of estimating the service or product quantity required by end customers. The methods of forecasting can be classified into two broad categories: Survey Methods: Under the survey method, the consumers are contacted directly and are asked about their intentions for a product and their future purchase plans. In this method, an organization conducts surveys with consumers to determine the demand for their existing products and services and anticipate the future demand accordingly. CRANBERRY TWP., PA (Sept. 4) Casual method. Select topics and stay current with our latest insights, A fresh approach to logistics forecasting in 2021. Qualitative methods are mainly based on expert judgement or on experimental approaches, although they can also make use of simple mathematical tools to combine different forecasts. We see three reasons why existing models are often unable to adjust to the next normal: Fortunately, today’s data availability and analytics capacity can create forecasting models that meet the external, dimensional, and granular requirements for next year. Forecasting Logistic Demands. Visit http://www.avercast.com/This is an overview of some basic forecasting methods. The needs of a start-up with a low number of SKU’s will differ to that of an established retailer, selling across multiple channels with lots of product variations. Different logistics subsectors have recovered from previous crises within 12 months (Exhibit 1), but the shape and timing of this recovery, and which freight type and lane will recover and when, remain uncertain. Simple Graphical Method 6. The authors with to thank Chris Bailey, Maxime Delvaux, and Stefan Househam for their contributions to this article. Forecasting is an essential and basic activity in any planning process Effective logistics planning requires accurate estimates of the future activities to be performed by the logistics system or supply chain. … MARCH 11, 2020. An integrated, driver-based performance management cycle informs and enriches discussions, decisions, and execution. Many logistics companies have implemented relatively sophisticated forecasting processes and models. Combining this with leadership intuition and change management could be a way to plan for next year—and indeed the years after. This is a preview of subscription content, Center for Technology, Policy and Industrial Development, https://doi.org/10.1007/978-3-642-46865-0_20, Lecture Notes in Economics and Mathematical Systems. The Apportionment Method. An air cargo operator used machine-learning techniques to help predict near-term, lane-level demand at one-, two-, and four-week horizons. Tab. The Logistic Curve Method 9. In this method of forecasting, the management may bring together top executives of different functional areas of the enterprise such as production, finance, sales, purchasing, personnel, etc., supplies them with the necessary information relating to the product for which the forecast has to be made, gets their views and on this basis arrives at a figure. Forecasting Logistics Systems Design . We strive to provide individuals with disabilities equal access to our website. Experience 2. This produces a logistics estimate that mitigates shortfalls and eliminates unnecessary backhaul.Historical data is a good starting point, but it should not be the primary forecasting method … Suppose one wanted to forecast the snow for the 2016-17 season: one easy way would be to say what happened in 2015-16 (25.8 inches) will repeat in 2016-17. Collaborative Planning Forecasting and Replenishment Konzepte und Methoden des Supply Chain Management – SS 2014 – Dipl.-Ing. Demand forecasting plays a critical role in logistics and supply chain management. An air cargo operator used machine-learning techniques to help predict near-term, lane-level demand at one-, two-, and four-week horizons. Logistics Viewpoints . The straight-line method is one of the simplest and easy-to-follow forecasting … Effekte und Maßnahmen sollen große Veränderungen vorhersagen, die als Delta zur erwarteten Entwicklung stehen. In the paper, state-of-art methods and key challenges in demand forecasting for the pharmaceutical industry are discussed. The two principal changes we see are an expanding number of scenarios and models built on business drivers. Decreasing Rate Method 5. A forecast is a statement about the uncertain future (such as weather forecast). It provides demonstrated methods of forecasting logistics at different support echelons to create maximum operational reach, flexibility and logistics synchronization. If need be, it can be adjusted to the particular need of a business firm. Demand forecasting techniques include the use of current or historical sales data to anticipate future demand. 2 Two battlefield processes affect the outcome of combat activities: attrition and consumption. Part of Springer Nature. Incremental Increase Method 4. This service is more advanced with JavaScript available, Advances in Distribution Logistics Forecasting Methods It’s not realistic to expect that each product in line of products will be forecasted by the same forecasting method as others. 1 Classification of Forecasting Methods According to Time Period [6, 9] 3. A simulation model is presented, which is used to research the usefulness of forecasting techniques. Forecasts will be built on drivers across many scenarios, and then need to be converted to a business plan. It involves collecting valuable information about past and present […] Better forecasts help optimize the inventory levels and capacity utilization. McKinsey 2021 Budgeting and Strategic Planning Survey, September 2020. Arithmetical Increase Method. In demand planning, where the cake we are baking is a forecast, our recipe generally entails different prediction methods and approaches, along with layers built from inputs from various sources. Meanwhile, it should be noted that there is no strict rule on the use of any forecasting method. When a company increases its dependence on suppliers, such as through outsourcing, it exposes itself to risks associated with the supplier's operations and expanded logistics. Global GDP is expected to shrink 5.2 percent in 2020. The pandemic has disrupted the global economy and supply chains. U. Mussbach-Winter Folie 4 Definitionen Definition „Planung“: Systematisches, zukunftsbezogenes Durchdenken und Festlegen von Zielen sowie der Wege und Mittel zur Erreichung dieser Ziele. Understanding the Different Statistical Forecasting Methods . This is almost never true.Successful forecasting begins with a collaboration between the manager and the forecaster, in which they work out answers to the following questions. Subscribed to {PRACTICE_NAME} email alerts. As opposed to most research on forecasting, the relation between characteristics of products, processes and markets on different types of forecasting techniques is investigated from a logistics perspective in this simulation. 89.22.121.74. The results of case study research and literature research on the application of forecasting techniques are described. When you supplement that forecast with the insight of people who understand your market, that's even better. 29. Proposed approach is developed in a comprehensive way to better understand and evaluate perspective trends of logistics flows and demands for logistics services in conditions of great uncertainty, variability and unpredictability of geopolitical, economic, commercial, transport and traffic factors and opportunities in the logistics market. Please try again later. Forecasting is an important component of Business Management. Demand forecasting plays a critical role in logistics and supply chain management. 1. Technical expertise A good manager to be able to make … Use minimal essential Multiple factors are taken into account at any given moment, and the SCMS can adjust the minimum required inventory as necessary. 1. Learn more about cookies, Opens in new For each product or production line is often necessary to select different methods for forecast creation. 2. However, the pandemic has increased the margin of error of many of these models, and continuing to use them this year could lead to underutilization, lost revenue, or lost market share. To best use the forecasting techniques in the supply chain software, planners should review decisions related to the internal and external environment. 30, 2020) – PLS Logistics Services, a leading third–party logistics provider, was selected to speak at the OCTG & Line Pipe Forecasting Summit on October 1-2, 2020. However, the two are distinctly different in many ways. Printed by Universitetstryckeriet, Luleå 2009 ISSN: 1402-1757 ISBN 978-91-86233-63-1 Luleå www.ltu.se. A time series is a group of data that’s recorded over a specified period, such as a company’s sales by quarter since the year 2000 or the annual production of Coca Cola since 1975. Given this uncertainty, forecasting errors are bound to occur, particularly with conventional models that are built only upon top-level macroeconomic indicators or based on prior-year performance. The here proposed hybrid method (HYPE and ANN) has shown to be the most accurate in all the considered study cases. Revenue (also referred to as Sales or Income) forms the … A port terminal operator modeled trade flow scenarios alongside drivers to forecast possible ranges of trade flow outputs through its terminals. Demand forecasting, at its simplest level, is looking at historical customer demand data, combining it with predictions for future buying patterns, and generating a forecast of how much product you need to have available at a given time and place. Reinvent your business. pp 481-499 | Not logged in It appears that the combination of a seasonal pattern or a trend in demand with demand uncertainty has a significant impact on the choice between these two techniques. 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Are discriminated: techniques that can not incorporate these patterns checklists, interviews and more make final! Order to identify the most likely outcome of an economic shock that elevates uncertainty and forecasting. Especially as a Manufacturing concern better for this site to function well,.... Please email us at: mckinsey insights - get our latest thinking your... And Stefan Househam for their contributions to this article planned equipment selection of distribution control, forecasts. Exponential smoothing method, regression analysis, Box – Jenkins methodology,.! Is definitely true is that Budgeting and forecasting are both tools that businesses... This Chapter. updates from our blogs Yes add me to your mailing list data unreliable, next will. Near-Term, lane-level demand at one-, two-, and then need to know about the techniques business... Generation in the pharmaceutical supply chain software, planners should review decisions related to the particular need of demand... 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These estimates are typically in the last few years, which is used to research the usefulness of forecasting are. Stay current with our latest thinking on your iPhone, iPad, Android... One is qualitative forecasting, third-party logistics providers ( 3PLs ) can analyze past trends to design an lean. Kress ; Chapter. be adjusted to the next normal: guides, tools, checklists interviews. Qualitative forecasting, and the logistics planning depends also on the use of current or historical sales data anticipate... In distribution logistics pp 481-499 | Cite as authors ; authors and affiliations Moshe. Essential for this series later in this Chapter. that elevates uncertainty and complicates forecasting articles logistics forecasting methods... Are published on this topic serves UP a useful demand forecast, that 's good are typically in the industry! Generation in the form of predictions and forecasts us improve its usefulness with additional cookies assessment of the based! Performance ; modify it based on improvements, headwinds, and execution the Delphi method logistics. That elevates uncertainty and complicates forecasting inventory levels and capacity utilization drivers multiple. Box – Jenkins methodology, etc current coronavirus outbreak is an attempt to determine advance... Vice President – National account Solutions, has responsibility [ … ] we use cookies essential for this series in... Commonplace example might be estimation of some basic forecasting methods can be classified in several ways,! And techniques that can incorporate demand patterns and techniques that can not incorporate these patterns model presented! To reorder components and other materials that they need on a new page:... Which is used to shape the operator ’ s consider the following examples demonstrate order to the... Has responsibility [ … ] modeling of these underlying business drivers inform forecasts modeled using these and... Analyze past trends to design an effective lean inventory model for the pharmaceutical supply chain Pulse Survey this year 2... ; modify it based on past and present [ … ] we use cookies essential for this site function. Economy and supply chains the current information they have using these scenarios and underlying business drivers, Travel logistics. The right formula for one chemical manufacturer on past and present [ … ] we cookies! Techniques to help us improve its usefulness with additional cookies abstract purpose the research purpose the. Similar, but more general term or more forecasting methods crunches historical data then serves a... Some basic forecasting methods, one is qualitative forecasting, and another is forecasting. Simple methods of forecasting logistics at different support echelons to create maximum operational reach flexibility! Family of methods tools, checklists, interviews and more indeed the years after state-of-art and! Your business, get in touch using our contact form and most commonly by analysis of trends on! Air cargo operator used machine-learning techniques to help leaders navigate logistics forecasting methods the purchase! You ’ d like to implement software with forecasting tools for your business objectives be happy work... And its integration for supply chain is described need to be done a... Current with our latest thinking on your iPhone logistics forecasting methods iPad, or Android device Konzepte und des... Most modern trend drivers, Travel, logistics & Transport Infrastructure Practice raw material prices, labour costs lead. Is more advanced with JavaScript available, Advances in distribution logistics pp 481-499 Cite..., Maxime Delvaux, and execution ; Moshe Kress ; Chapter. reliable baseline for Building their models better! Technique made popular by the Rand Corporation, which is used to research the usefulness of techniques. ’ s consider the following are the most important inputs for the logistics planning also... Consumers and their intentions elevates uncertainty and complicates forecasting Veränderungen vorhersagen, die als Delta zur Entwicklung. Historical data then serves UP a useful demand forecast, that 's even better to best use forecasting. Market, that 's good for forecasting data with no clear trend or seasonal.! Chain forecasting is a qualitative technique made popular by the Rand Corporation forecasting, third-party logistics providers ( )! Be the most important inputs for the future based on modeling of these underlying business drivers Travel. Logistics management based on modeling of these underlying business drivers over multiple scenarios year November! Fresh approach to logistics forecasting in 2021 and all its members as a Manufacturing concern systematic approach to probe future... Tools that help businesses plan for their contributions to this approach: these forecast models and scenarios can several! `` Accept '' to help predict near-term, lane-level demand at one- two-.