ABSTRACT

This chapter shows the value and limitations of forecasting. It discusses the right level and frequency to forecast customer demand. The chapter explains what manufacturers should use a forecast for and what they should not use it for; and it explains the role of a forecast in planning the supply of materials. It explores how to develop and maintain a rolling annual forecast. To understand the problems of forecasting, it is useful to think about the weather. Some of the world's most powerful computers are used to forecast the weather, but even then there are some severe limitations. Time interval is one limiting factor on forecasts; the other is the level of the forecast. The companies insist on using forecast-driven replenishment to manage low-usage products or materials. For most businesses, it is possible to create a perfectly adequate forecast using Microsoft Excel. However, there are a number of commercially available forecasting tools that can assist to create a forecast.