Question #3: When should I focus my energy on qualitative forecasting techniques?
Qualitative forecasting techniques draw upon subjective data. These can be collected through polls, customer surveys, focus groups, conferring with industry experts, and, of course, the demand planner’s own judgment. As you might expect, however, this type of information has a limited shelf life, since it’s focused on current customer attitudes and behaviors.
Therefore, qualitative forecasting techniques are best used for short-term demand planning efforts. Make sure to incorporate these, for instance, when building your weekly or monthly forecasts, ordering from your suppliers, or monitoring optimal inventory levels.
Qualitative forecasting methods are also great when more concrete, quantitative data is absent or unreliable. If your industry is highly volatile, for instance, you may find that neither historical data nor quantitative forecasting techniques are all that helpful. And a product launch — whether the product itself is new or the market you’re introducing it to is new — is a prime example of a time when you’ll need to rely more on subjective data.
Finally, qualitative forecasting techniques are used to adjust and refine forecasts that have been developed first with quantitative techniques. Forecast accuracy only comes from blending the two techniques, and expert demand planners adjust the ratio depending on what they’re forecasting for and their particular industry.