This model is appropriate for items approaching barriers to future growth e.g. where a product’s market share is approaching its maximum. It assumes that the underlying trend in demand is gradually approaching a saturation level specified by the user. The model produces a curved trend reflecting the later stages of the standard product life cycle.
- IFP will obtain a trend curve of overall best fit to the adjusted historical data, taking into account the specified saturation level
- This trend curve is then projected into the future
- All selected historical periods are given equal weight
- Forecast values are then obtained by multiplying the projected trend value by the average seasonal factor for each month
Saturation level must be entered in terms of average units per month, e.g. a saturation level of 90,000 units per month would be equivalent to an annual saturation level of 1,080,000 units per annum. Note that the demand for a particular month may exceed the specified saturation level due to seasonal effects, e.g. a drug used for treating respiratory infections may exceed its average monthly saturation level in a winter month such as November.