The Handbook of Behavioral Operations

12Forecast Decisions

Paul Goodwin¹, Brent Moritz², and Enno Siemsen³

¹ School of Management, University of Bath, Bath, UK

² Smeal College of Business, Pennsylvania State University, University Park, PA, USA

³ Wisconsin School of Business, University of Wisconsin‐Madison, Madison, WI, USA

12.1 An Introduction to Forecasting Behavior

12.1.1 Demand Forecasting

Every plan needs a forecast. For most operational planning processes, the demand forecast is the most relevant and important input. Planning means preparing and coordinating an organization or supply chain for the future; such preparation requires an assessment of the future state of the world – specifically the likely demand or possible range of demands that the organization faces. The term “forecasting” does not imply that specific forecasting methods are used; rather it describes the process of predicting or assessing a future state. The statistical methods for demand forecasting based on prior sales data are well understood. This chapter examines the human side of demand forecasting, both from the perspective of individual decision‐making (i.e. how human judgment affects demand forecasting) and from the perspective of organizational decision‐making (e.g. how the interplay between different stakeholders can impact the development of a consensus forecast in or between organizations).

Research in operations management often assumes the existence of a demand forecast; many analytical models assume a specific probability ...