ABSTRACT

An effective forecasting process allows the organisation to plan for all eventualities, to assess the likelihood of meeting the forecast values, and to evaluate the risk to the organisation of not meeting them. Demand forecasting operates within three horizons - short range, medium range, and long range. Organisations use demand management strategies, in some instances, to influence the timing, quantity, and nature of demand to take advantage of excess capacity, an oversupply, or undersupply, or to change the timing of demand.

The opening perspective discusses forecasting, whether constrained or unconstrained, using a decade of sales from Apple Inc. as an example.

We discuss forecast value added and distinguish between qualitative and quantitative forecasting. This chapter explains and calculates forecast deviation and uses an example of decomposition, which occurs when the time series data splits into components of demand - trend, seasonal, and cyclical. Trend measures the general upwards or downwards direction, seasonal indicates the effect of different seasons, and cyclical shows the effect of a longer repeating nonseasonal period cycle. The calculations project each separate component into the future and sum the projections to develop the new forecast.

Power, influence, hierarchy, knowledge, lack of knowledge, history, experience, lack of experience, market awareness, advertising and promotion, pricing, and politics all play their part in developing the demand forecast.