Business Forecasting

CHAPTER 4 Process and Politics of Business Forecasting

We all believe that business forecasting should be an objective, dispassionate, and scientific undertaking, and yet it is conducted within the often-politicized confines of an organization. Forecasters and decision makers can have biases and agendas that undermine forecast accuracy. With all the potential “game playing” in the process, you never know whom you can trust.

We begin this chapter with a look at forecast value added (FVA) analysis, an increasingly popular method for uncovering activities that fail to improve the forecasts. The unfortunate reality is that many common forecasting practices—even so-called best practices—may actually result in forecasts that are worse than doing nothing more than simply using the naïve no-change model. Steve Morlidge finds, for example, that half of the forecasts in his study failed to beat the naïve model forecasts.

Other articles in this chapter look at specific issues in forecast-process design: where to position the forecasting function, whether to hold face-to-face meetings, whether to include the sales force in the process, and how to set performance objectives. Various “worst practices” are identified, along with ways to provide a more trustworthy forecast that management will believe in and act on. We end this chapter with a look at the widely adopted process of sales and operations planning (S&OP)—how it can be applied in the retail industry, and its future direction.