Technical Note: New developments in forecasting techniques

Uncertainty is a major problem for management in the environment of today. The ability to predict the future and minimize this uncertainty is a key in the success of a company. That is why forecasting is such an important management tool. In forecasting there are several considerations, such as time horizon, technical sophistication, cost, data availability and variability and consistency of data. Once these factors are weighed, a method can be chosen. There are three major categories of methods to choose from: judgmental methods, counting methods, and time series methods. In choosing these methods, the following guidelines have recently been examined: 1) Simple may be better than complex. 2) Updating forecasts based on actual results enhances accuracy. 3) Combining methods enhances accuracy. 4) Judgmental methods (using a 'gut' feel) are popular. An understanding of these concepts will lead to a more accurate forecast and more control of the future.