Business Forecasting: Practical Problems and Solutions

Praise for BUSINESS FORECASTING

"This book is the survivor′s guide for business forecasters. It covers a wide range of need–to–know topics from ′what is demand′ to ′why should I trust your forecast.′"
Scott Roy, Collaboration Planning Manager, Wells Enterprises Inc.

"This is a tremendous compilation from some of the best forecasting analytics and business minds of today. A reference that should be on the shelf of anyone whose job is to develop forecasts."
Jim Ferris, Director of Supply Chain Analytics, Clarkston Consulting

"Finally, a book tailored to business forecasting that is comprehensive for everything from data gathering to the art and politics of explaining why we are wrong!"
Eric Wilson, Director, Demand Planning and S&OP, Tempur Sealy International

"In spite of my many years in forecasting and planning, the reading was so captivating that I could not stop before it was over. Absolutely a ′must–read′ for every person working in business forecasting."
Igor Gusakov, Consulting Director, Goodsforecast

"This book is a wonderful compendium of demand planning and S&OP insights drawn from some of the best minds and practitioners in the industry."
Patrick Bower, Senior Director, Global Supply Chain Planning & Customer Service, Combe Incorporated

"The editors do an excellent job of introducing a broad set of topics critical for deploying and maintaining a successful forecasting process within an organization."
Sam Iosevich, Managing Principal, Prognos

"I would definitely recommend this reader as a key resource for those looking to learn more or to have knowledge at their fingertips for that moment when they need a refresher."
Curtis Brewer, Forecasting Manager, Bayer CropScience

"This terrific compilation of writings from virtually all of the big names in the forecasting community proves that innovation in forecasting is vibrant."
Rob Stevens, Vice President, First Analytics

Foreword

Preface

Chapter 1 Fundamental Considerations in Business Forecasting

1.1 Getting Real About Uncertainty (Goodwin – Foresight)

1.2 What Demand Planners Can Learn from the Stock Market (ReCorr JBF)

1.3 Toward a More Precise Definition of Forecastability (Boylan – Foresight)

1.4 Forecastability: A New Method (Schubert – Foresight)

1.5 Forecast Errors and Their Avoidability (Morlidge – Foresight)

1.6 The Perils of Benchmarking (Gilliland APICS eNews)

1.7 Can We Obtain Valid Benchmarks from Published Surveys of Forecast Accuracy? (Kolassa – Foresight)

1.8 Defining Demand for Demand Forecasting (Gilliland – Foresight)

1.9 Using Forecasting to Steer the Business: Six Principles (Morlidge – Foresight)

1.10 The Beauty of Forecasting (Orrell Foresight)

Chapter 2 Methods of Statistical Forecasting

2.1 Confessions of a Pragmatic Forecaster (Chatfield – Foresight)

2.2 New Evidence on the Value of Combining Forecasts (Goodwin – Foresight)

2.3 How to Forecast Data Containing Outliers (Stellwagen Trends Newsletter)

2.4 Selecting Your Statistical Forecasting Level (Stellwagen ForecastPro blog)

2.5 When is a Flat–line Forecast Appropriate (Stellwagen ForecastPro blog)

2.6 Forecasting by Time Compression (Sglavo SAS whitepaper)

2.7 Data Mining for Forecasting: An Introduction (Wells & Rey new content adapt from book)

2.8 Process and Methods for Data Mining for Forecasting (Wells & Rey new content adapt from book)

2.9 Worst–Case Scenarios in Forecasting: How Bad Can Things Get (Batchelor – Foresight)

2.10 Good Patterns, Bad Patterns (Batchelor – Foresight)

Chapter 3 Forecasting Performance Evaluation &and Reporting

3.1 Dos and Don ts of Forecast Accuracy Measurement: A Tutorial (Tashman Foresight)

3.2 How to Track Forecast Accuracy to Guide Forecast Process Improvement (Hoover – Foresight)

3.3 A Softer Approach to the Measurement of Forecast Accuracy (Boylan – Foresight)

3.4 Measuring Forecast Accuracy (Hyndman new content)

3.5 Should We Define Forecast Error as e = F A or e = A F? (Green & Tashman – Foresight)

3.6 Percentage Error: What Denominator? (Green & Tashman – Foresight)

3.7 Percentage Errors Can Ruin Your Day (Kolassa & Martin – Foresight)

3.8 Another Look at Forecast–Accuracy Metrics for Intermittent Demand (Hyndman Foresight)

3.9 Advantages of the MAD/Mean Ratio Over the MAPE (Kolassa & Schutz – Foresight)

3.10 Use Scaled Errors Instead of Percentage Errors in Forecast Evaluations (Valentin – Foresight)

3.11 An Expanded Prediction–Realization Diagram for Assessing Forecast Errors (Pearson Foresight)

3.12 Forecast Error Measures: Critical Review and Practical Recommendations (Davydenko & Fildes adapt from IJF)

3.13 Measuring the Quality of Intermittent Demand Forecasts: It s Worse than We ve Thought! (Steve Morlidge Foresight)

3.14 Managing Forecasts by Exception (Stellwagen ForecastPro blog)

3.15 Using Process Behaviour Charts to Improve Forecasting and Decision–Making (Joseph & Finney – Foresight)

3.16 Can Your Forecast Beat the Naïve Forecast (Snapp SCMFocus blog)

Chapter 4 Process and Politics of Business Forecasting

4.1 FVA: A Reality Check on Forecasting Practices (Gilliland – Foresight)

4.2 Where Should the Forecasting Function Reside (Lapide JBF)[AU: Spell out JBF]

4.3 Setting Performance Objectives (Gilliland BFD blog)[AU: spell out BFD.]

4.4 Using Relative Error Metrics to Improve Forecast Quality in the Supply Chain (Morlidge – Foresight)

4.5 Why Should I Trust Your Forecasts (Gonul, Onkal & Goodwin – Foresight)

4.6 High on Complexity, Low on Evidence: Are Advanced Forecasting Methods Always as Good as They Seem? (Goodwin – Foresight)

4.7 Should the Forecasting Process Eliminate Face–to–Face Meetings? (Armstrong Foresight)

4.8 The Impact of Sales Forecast Game Playing on Supply Chains (Mello – Foresight)

4.9 Role of the Sales Force in Forecasting (Gilliland – Foresight)

4.10 Good and Bad Judgment in Forecasting (Fildes & Goodwin – Foresight)

4.11 Worst practices in new product forecasting (Gilliland – JBF)

4.12 Sales & Operations Planning in the Retail Industry (Harwell JBF)

4.13 Sales & Operations Planning: Where Is It Going? (Wallace JBF)

Index

MICHAEL GILLILAND is Marketing Manager for SAS forecasting software, editor of the Forecasting Practice section of Foresight: The International Journal of Applied Forecasting, and author of The Business Forecasting Deal. He has published articles in Supply Chain Management Review, Journal of Business Forecasting, Analytics, Supply Chain Forecasting Digest, APICS Magazine, Swiss Analytics Magazine, and Foresight. Mike holds a BA in Philosophy from Michigan State University, and Master′s degrees in Philosophy and Mathematical Sciences from Johns Hopkins University. Follow his blog, The Business Forecasting Deal, at blogs.sas.com/content/forecasting.

LEN TASHMAN is the founding editor of Foresight: The International Journal of Applied Forecasting, now in its 10th year of publication. He serves on the Board of Directors of the International Institute of Forecasters and is organizer and chair of the Forecasting in Practice Track at the annual International Symposium on Forecasting. Len is an emeritus professor of business administration at the University of Vermont and Director of the Center for Business Forecasting.

UDO SGLAVO is Senior Director of Predictive Modeling R&D at SAS Institute. His team develops industry–leading and award–winning software for data mining, machine learning, and large scale automatic forecasting. He has published articles in Analytics, and is a contributor to The Business Forecasting Deal blog. Udo has served on the practitioner advisory board of Foresight, and holds a diploma in mathematics from University of Applied Sciences, Darmstadt, Germany.