Summary: Approaches to Forecasting : A Tutorial

Summary

• Forecasting is a critical part of CPFR. Fortunately, there are a number of well-developed tools and strategies for developing forecasts.

• Avoid forecasting values when you can calculate them.

For example, in an ideal world, we would only forecast POS demand, and use these numbers to calculate the replenishment forecasts at the DCs, and the order forecasts at the plants.

• Quantitative forecasting techniques are best-suited to situations where historical data exists and the past is considered a good indicator of what will happen in the future.
• Qualitative forecasting methods are used when the situation is vague and little data exists from which to develop a forecast. Qualitative forecasting often depends on intuition and experience, although techniques such as the Delphi method and life cycle analogy help provide structure to these efforts.
• Regardless of the forecasting techniques used, forecasting efforts are incomplete unless we measure and track forecasting accuracy.

• In many businesses, the vast majority of items can be forecasted for using fairly simple quantitative models. Most of the time will be spent developing forecasts for the “difficult few,” such as new products or markets with little or no demand history.