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Picking the Right Forecasting Technique Source: Eight Methods that Improve Forecasting Accuracy. Logility. https://www.loginity.com/Logility files/01/01876a05-4919-4-25-243d-ac131b22a275.pdf "Companies routinely rank demand planning immaturity as a major obstacle in meeting their supply chain goals, suggests a new white paper called Eight Methods that improve Forecasting Accuracy But accurate forecasts are the foundation for profitable business growth. Optimal demand planning and forecasting requires comprehensive modeling capabilities plus the flexibility and ease-of-use to shift methods as life cycles progress and market conditions change Attribute-based methods that se demand profiles are often suited to new product Introduction and end of product to goes, at times when reliable historical demand data is lacking or the available data is less relevant At the more mature stages of the product Mercycle 5 different time-series statistical models come into play, including modified Holt, Holt-Winters, moving average, and intermittent or low demand. These models are used to create retrospective forecasts that cover prior periods (typically 3 years) of documented demand. The forecasts are the matched to actual demand history to determine which one best fits the real world data The best fit winner is used to create an objective base forecast Causal methods are used throughout the we cycle to adjust forecasts in anticipation of promotional events Causal methods allow planners to predict how discounting and other promotional factors will affect volume, and layer the impact of these events on top of the underlying base forecast Finally derived models can be used to create a Parent-Child Polationship in which forecasts for closely related products are driven as a percentage of the forecast for a leader product the Finally, derived models can be used to create a Porent-Child relationship in which forecasts for closely related products are driven as a percentage of the forecast for a "leader product This ensures that when the forecast is modified for the parent, all the child' forecasts would be updated accordingly To prevail in a business economy shaped by uncertain demand and rapid market changes, all of these forecasting methods must be hamessed. Forecasting software can automate much of the selection and switching of methods as a product moves through its life cycle. A best-in-class forecasting system is one that provides flexibility for users to weight elements and override key parameters in the forecast calculation based on their intuitive knowledge and market expertise. Critical Thinking Questions 1. Why are accurate forecasts so important? O A They are the foundation for business growth OB Humans cannot make business forecasts C. They are always quantitative in nature D. Forecasting is an exact science 2 The best type of forecasting for introducing a new product is 2. The best type of forecasting for introducing a new product is O A. using historical data. OB. an attributo-based method. O c. a time series model OD. There is no good method. Guesses are all managers can do. 3. Time series models include O A weighted moving averages OB. Holt and Holt-Winters O moving averages D. All of the above 4. Forecasting software O A. can automate the use of different methods as a product goes thorough its lifecycle. O B. can only be used in new product introduction OC does not allow human input as it is totally automated OD is accurate 95% of the time