Forecasting is Better than Throwing Darts Blindfolded

Forecasts may not always be accurate, but they are important.  Forecasting plays an important role in managing cash flow, inventory, sales, staffing and much more.  Many qualitative (e.g., subjective) and quantitative forecasts are available for use.  Quantitative methods have been proven to reduce errors compared to subjective methods though.  This is not to say that you should strictly base your decisions on quantitative forecasts though.

Qualitative Forecasts:
– Survey of Customers
– Jury of Executive Opinion(s)
– The Delphi Method

Quantitative Forecasts:
– Moving Averages
– Exponential Smoothing
– Regression Analysis
– Time Series Decomposition
– ARIMA (Box-Jenkins)

Forecasting should not be perceived as quintessential.  A forecast is simply a tool to help decision makers by providing the best possible judgement about the future.  Forecasts are not always correct; however, they can be modified to improve accuracy over-time.  Popular quantitative methods incorporate comparisons to reduce error.

It is best to gather as many data points as possible before making important decisions. Forecasting is similar to traditional research methods.  Access qualitative insights.  Gather expert opinions.  Speak to leaders about their view on market direction.  Create quantitative forecasts.  Use all available information to make sound business decisions.

Predicting the future is not always precise.  Attempt to build accurate forecasts. Implement steps to improve forecast accuracy over-time.  Functional forecasts will allow your business to operate more efficiently.  Forecasts may not be totally accurate, but developing a good forecast strategy is better than throwing darts blindfolded.