WHAT S the forecast Manufacturersy Chaman L Jain Ph D smaller the lead time the more
WHAT’S the forecast? ... smaller the lead time, the more quickly the company can adjust to an error, and the larger the error it can tolerate. ... For products such as perishables or fashion products, or products that have no value after a set time—airline seats, for example—the cost of an error can be high. ... Remember that a forecast equals pattern plus error. ... In forecasting, then, it’s not a matter of how sophisticated a model is, but how well a given model captures the underlying data. ... It’s best to start with such a model and then proceed to more complex models until your forecasting need is satisfied. ... There is a magic model— it’s just a matter of finding it. ... Since each model captures a certain data pattern, and each data set has a certain data pattern, it’s a matter of matching the right model with the right data set. ... They use it not because it’s the right model but because they feel most comfortable with it. ... Once the best model is discovered, it will work all the time. ... The relationships of certain variables can also change with time. ... This doesn’t mean, however, that we should throw out a model if it doesn’t work at a given time. Keep in mind that a model is selected on the basis of average performance— it’s the model that has the highest probability of success. ... Over time, of course, if a model consistently performs poorly, it should be discarded. ... A well-trained forecaster can prepare a forecast without anyone’s help. ... They know better than anyone what’s selling, what’s not, and why; they know what the competition is doing in the marketplace; and they know their customers’ plans. ... All these players have an effect on the forecast. ... For example, forecast accuracy can be greatly enhanced if a customer regularly provides information about their sales and inventories, as well as their advertising plan—that is, when they plan to advertise your products in their materials. ... FORECASTING IS NEITHER A science nor an art—it’s a combination of both.