Seven Keys to Better Forecasting Lecture Review

Vocabulary flashcards covering the seven keys to better forecasting, including the distinction between forecasts, plans, and goals, and the levels of cross-functional collaboration.

Brake Parts, Inc.

A company cited for improving its bottom line by $6\text{ million}$ per month after improving its forecasting processes.

Forecast

The best estimate of future demand; it is separate from management plans and motivational goals.

Plan

A management commitment, which should be distinguished from a forecast to avoid confusion with motivational strategy.

Goal

A motivational target; the text states it is inappropriate for this to be confused with the firm's forecast.

True Demand

The actual market requirement for a product, including unfilled orders and lost sales, rather than just shipment history.

Shipments

Data that predicts a company’s previous ability to meet demand but may hide unmet demand if supply capacity was limited.

Communication

The first level of cross-functional behavior, defined as one-way reporting between departments.

Coordination

The second level of cross-functional behavior, where meetings occur but one function typically dominates the process.

Collaboration

The third level of cross-functional behavior characterized by equal input, shared ownership, and a consensus forecast.

Black Market Forecasts

Duplicated forecasting efforts created by individual departments due to mistrust of the official forecast.

Islands of Analysis

A situation where different departments create their own forecasts using separate systems and inconsistent assumptions.

Time Series

A quantitative forecasting tool used to identify and project trends and seasonality.

Regression

A quantitative forecasting tool used to establish and model relationships with price, promotions, and the economy.

Qualitative Tools

Forecasting methods based on market intelligence, competitor actions, and sales force input used to adjust quantitative baselines.

MAPE

Mean Absolute Percentage Error, a multidimensional metric used to measure forecast accuracy.

WMAPE

Weighted Mean Absolute Percentage Error, a metric used to track accuracy, often at multiple levels of aggregation.

Bias

A metric used to identify the source and direction of error in a forecast model or process.