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Frequently Asked Questions Vol. 2

Tech Graph

Question #2: When should I rely on historical data and quantitative forecasting techniques?

So the larger the data set — and the farther back you can go in time — the better. If you're an established company that has years of sales data to draw from, for instance, or if your product is in a mature stage of its market life cycle, you're in a prime position to leverage quantitative techniques for greater forecast accuracy. And you’ll derive even more value if you’re in an overall stable market that’s less prone to variability or volatility.

Quantitative techniques are also used to establish a baseline forecast and predict long-term trends. Demand planners rely on them, for instance, when generating quarterly, seasonal, or yearly forecasts, which are, in turn, used to create budgets, make staffing and resource allocation decisions, and develop other strategic initiatives.

Yet while forecasting using historical data offers a glimpse into a possible future, the view is limited. In essence, these methods give you a starting point from which to build your forecasts. Expert demand planners will then tweak those based on information gathered using qualitative techniques.

 

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