S&OP, Demand Planning & Forecasting worked example

Forecast Value Add at 40% forecast accuracy lift captured by planning: a worked example

Push forecast accuracy lift captured by planning up to 40% and the picture changes. This example computes every intermediate figure at that operating point. A demand planning lead uses it to prove whether the FVA review cycle recovers more margin than it costs to run.

The inputs for this scenario

  • Forecasted SKU-months reviewed in the cycle: 1,200 SKU-months (unchanged)
  • Gross margin exposed to error per SKU-month: 85 $/SKU-month (unchanged)
  • Forecast accuracy lift captured by planning: 40 % (raised for this scenario; the documented default is 35)
  • Planning tool and analyst overhead cost: 4,000 $ (unchanged)

Working through the calculation

  • Applying the documented formula (Total FVA = SKU-periods x margin at risk x accuracy lift % + planning overhead) to the inputs above produces each figure below.
  • At this operating point the engine returns 44,800 $ for total forecast value add cost, the number this scenario is built around.
  • At this operating point the engine returns 37.33 $ / piece for forecast value add cost per unit.
  • At this operating point the engine returns 40,800 $ for variable forecast value add cost.
  • At this operating point the engine returns 4,000 $ for fixed forecast value add adder.

How this compares with the baseline

  • Against the tool's baseline example, where forecast accuracy lift captured by planning sits at 35% and the headline result is 39,700 $, this scenario comes in 12.85% above the baseline at 44,800 $.
  • It computes the total dollar value added by forecasting — margin at risk times accuracy lift plus overhead — and the value added per SKU-month. The value of this scenario is the size of the gap it exposes: that gap, priced out over a year, is the budget you can justify spending to close it.

Results at a glance

  • Total forecast value add cost: 44,800 $ (headline result)
  • Forecast value add cost per unit: 37.33 $ / piece
  • Variable forecast value add cost: 40,800 $
  • Fixed forecast value add adder: 4,000 $

Run it with your numbers

  • Every input above is editable in the live Forecast Value Add calculator, which recalculates instantly and can be shared with the inputs intact.

Last reviewed 2026-05-12.