}

The Smart Forecaster

Pursuing best practices in demand planning, forecasting and inventory optimization

Most demand forecasts are partial or incomplete: They provide only one single number: the most likely value of future demand. This is called a point forecast. Usually, the point forecast estimates the average value of future demand.  Interval forecasts provide an estimate of the possible future range of demand (i.e. demand has a 90% chance of being between 50 – 100 units).  Probabilistic forecasts take it a step further and provide additional information.  Knowing more is always better than knowing less and the probabilistic forecast provides that extra information so crucial for inventory management. This video blog by Dr. Thomas Willemain explains each type of forecast and the advantages of probabilistic forecasting.

 

Watch Now

 

 

Point forecast (green) shows what is most likely to happen.  The Interval Forecast shows the range (blue) of possibilities.

 

Probability Forecast shows the probability of each value occurring

 

 

Leave a Comment

Related Posts

Stop Leaking Money with Manual Inventory Controls

Stop Leaking Money with Manual Inventory Controls

An inventory professional who is responsible for 10,000 items has 10,000 things to stress over every day. Double that for someone responsible for 20,000 items. In the crush of business, routine decisions often take second place to fire-fighting: dealing with supplier hiccups, straightening out paperwork mistakes, recovering from that collision between a truck and the loading dock.

5 Considerations When Evaluating your ERP system’s Forecasting Capabilities

5 Considerations When Evaluating your ERP system’s Forecasting Capabilities

Consider what is meant by “demand management”, “demand planning”, and “forecasting”. These terms imply certain standard functionality for collaboration, statistical analysis, and reporting to support a professional demand planning process.  However, in most ERP systems, “demand management” running MRP and reconciling demand and supply for the purpose of placing orders

The 3 Types of Supply Chain Analytics

The 3 Types of Supply Chain Analytics

The three types of supply chain analytics are “descriptive”, “predictive”, and “prescriptive.” Each plays a different role in helping you manage your inventory. Modern supply chain software lets you exploit all three helping you to reduce inventory costs, improve on time delivery and service levels, while running a more efficient supply chain.

Recent Posts

  • Quantum atom software illustrationQuantum Inventory Theory?
    Physics at the quantum level is quite weird – not at all like what we experience in our usual macroscopic life. Among the oddities are “superposition”, “entanglement”, and “quantum foam.”  Weird as these phenomena are, I cannot help seeing analogs in the supposedly different world of supply chain management. […]
  • Stop Leaking Money with Manual Inventory Controls
    An inventory professional who is responsible for 10,000 items has 10,000 things to stress over every day. Double that for someone responsible for 20,000 items. In the crush of business, routine decisions often take second place to fire-fighting: dealing with supplier hiccups, straightening out paperwork mistakes, recovering from that collision between a truck and the loading dock. […]