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When do you use qualitative forecasts?
Data as a historical series is not available, or is not relevant to future needs.
An unusual product or a unique project is being contemplated.
Forecast horizon is longer than the safe extrapolation of a quantitative method.
Trying to forecast beyond 1 or 2 years.
What are the pros of qualitative forecasts?
Little mathematical skill required.
They can: identify systematic change more quickly, better predict the effect of such change on the future. Pick up on "broken legs"
What are "broken leg cues"
Model that people can pick up on if someone might go to the movies or not etc.
What are the problems with qualitative forecasts?
Almost always biased. Not consistently accurate over time. Takes years of experience to learn how to convert intuitive judgement into good forecasts.
What are the types of qualitative forecasts?
Sales force composites. Consumer surveys. Jury of executive opinion. Delphi method.
What are sales force composites?
Sales people provide a range of forecasts for a given SKU.
Optimistic, Pessimistic, Most likely
Forecasts for SKUs aggregated by sales manger for given product line or geographical area. Higher level planners than aggregate product line or geographic forecasts to arrive at projections for a given planning horizon.
What are the pros to sales force composites?
Information collected and organized from sales force.
Have daily contact with the customer.
What are the cons to sales force composites?
Biased towards under forecasting due to complication scheme. (Bonuses tend to exceeding objectives and incentive therefore to set bar low) Downward bias harmful to company. Scheduled production runs to short. Labor requirements underestimated. Stock-outs at consumer level.
What are consumer surveys?
Data collection: telephone contacts, personal interviews, questionnaires. (Extensive statistical analysis usually is applied to survey results in order to survey results in order to test hypotheses regarding consumer behavior)
What are the pros to consumer surveys?
Assumes that consumers actually plan their purchases. They follow through with their plans.
When are these assumptions more realistic?
Industrial sales vs. household or individuals
Big ticket items vs. convenience goods
What is Jury of Executive Opinion?
Combination of opinions of mangers and executives who are most likely to have the best insights about the firms business.
Data collection: One-on-one interviews, group meetings
Best to have wide representation of managerial flavors.
What are the pros of Jury of Executive Opinion?
Forecasting is done quickly and easily, without need of elaborate statistics. May be the best means of forecasting feasible in the absence of adequate data.
What are the cons of Jury of Executive Opinion?
High cohesiveness, Strong Leadership and Insulation of the group from outside opinions.
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