4 Characteristics of a Forecast

  1. It is always going to be wrong, always will be, we must learn to live with it.

  2. Forecasts are more accurate as we aggregate up into groups or product families.

  3. Forecasts are more accurate the closer they are to the current period, so the importance of reducing lead-times is evident here.

  4. A forecast should never be a single figure; it should be a number plus or minus the expected error, or a maximum and minimum figure.

We need to gain a feeling for the expected accuracy of the forecast. Forecasting is the wide science of prediction. Some events are very predictable, sun rise and sunset, tides, etc. Others are less predictable, such as weather forecasting and stock prices. Others are totally unpredictable such as the lottery. However, modern forecasting techniques can assist us forecasting more accurately than before for events that have some pattern to them or are being driven by some external forces.

So, business forecasting is the first step in the business planning process and a major part of the demand management process. It is the prediction of the sales of a company’s independent demand such as finished products and spare parts that are fo