Supply Chains: A Manager's Guide

Aggregating Demand

The preceding section explains how to forecast demand for a single product, but in practice you would generate forecasts for individual products only in special situations—for example, when you are deciding whether to introduce a new product or enter a new market. Setting those situations aside, the cost of generating separate forecasts for thousands of different products would be prohibitive, and the standard procedure is to group similar products together when making forecasts. This technique—called aggregation—might seem like it would degrade the quality of the forecasts because it would ignore differences among the individual products. In fact, just the opposite is true: These aggregate forecasts, as they are called, are ...