DEMAND FORECASTING FOR MANAGERS

Every plan needs a forecast - a reasonable prediction of the future. No business plan can be implemented without one. But the academic literature on forecasting is vast and spans disciplines such as statistics, economics, operations management and informed judgment and decision making. Recommendations from this literature have been implemented in a vast array of commercial software, and almost all modern companies have access to some decision support models that provide demand forecasts. In the long run, the demand forecast shapes decisions to build or close down plants, add or remove products from a portfolio, and bolster or challenge investor confidence in the stock price. In the short run forecasting software greatly aids managers in making functional decisions (how much are we going to sell next month, next year, or 5 years from now?) but without a proper understanding of the basics of forecasting, such software appears as a black-box, and the output from this software garners little trust within an organization. The intention of this book is to underscore the importance of demand forecasting and to demonstrate what an executive should know about it. It discusses the value of forecasting, presents both basic and advanced forecasting models, introduces the subject of time series and the technique of exponential smoothing (critical for accurate forecasts), examines the role that human judgment plays in interpreting the numbers and identifying forecasting errors. Finally, the book offers an organizational context by creating a rational framework that shows how forecasting is an integral part of business planning and demonstrates how to use forecasts within an organization.