As the company prepares to meet demand and capacity requirements for its planned future growth, you have been asked to review the current forecasting strategy and help implement a new strategic plan for forecasting demand. The new forecasting plan ties directly to the overall strategic planning methodology established by the company. The company historically has used a time series method. The forecasting methods under consideration are the following:
- Qualitative: human judgment, usually best used when little data is available
- Simulation: the use of computer models or judgment to imitate customer behavior
- Causal: used when there is a direct tie between demand and an environmental factor, such as cold weather
- Time series: the use of historical data to predict future needs
Using course materials and other research, complete the following:
- Identify which forecasting technique or multiple techniques should be used in the future for the company’s strategy. Are there other techniques available that are not listed above?
- Explain the technique you identify, and give an example of how it is used in the manufacturing, retail, and health care industries.
- Detail if 1 of the 4 techniques listed above should NOT be used and why.
- Evaluate the significance of forecasting error for the technique or techniques you have selected. What is the impact of error on your chosen technique?