Operations Management: An Integrated Approach, 5th Edition

TYPES OF FORECASTING METHODS

Forecasting methods can be classified into two groups: qualitative and quantitative. Table 8-1 shows these two categories and their characteristics.

Qualitative forecasting methods

Forecast is made subjectively by the forecaster.

Qualitative forecasting methods, often called judgmental methods, are methods in which the forecast is made subjectively by the forecaster. They are educated guesses by forecasters or experts based on intuition, knowledge, and experience. When you decide, based on your intuition, that a particular team is going to win a baseball game, you are making a qualitative forecast. Because qualitative methods are made by people, they are often biased. These biases can be related to personal motivation (“They are going to set my budget based on my forecast, so I'd better predict high.”), mood (“I feel lucky today!”), or conviction (“That pitcher can strike anybody out!”).

TABLE 8-1 Types of Forecasting Methods

Quantitative forecasting methods

Forecast is based on mathematical modeling.

Quantitative forecasting methods, on the other hand, are based on mathematical modeling. Because they are mathematical, these methods are consistent. The ...