Pitfall of Forecasting

Pitfall of forecasting

In forecasting, it is seldom perfect. This means that there are many outside factors that we cannot predict or control that have impact on the result. Moreover, many forecasting technique assumes that there is some underlying stability in the system. Therefore, some firms do their predictions using computerized forecasting software first and later closely monitor the product items when the demand is low. Besides that, using product family and aggregated forecasts are more accurate than individual product forecasts. This may helps balance the over and under predictions of each product. Below there are some disadvantages using different forecast analysis.

Trend forecast

The disadvantage of a trend forecast is that it produces only one result. It does not help analyze why the product demand behaves the way it does, and it provides no means to accurately measure how the changes in external variable influence the product demand. Because the assumptions used to make the forecast are usually stated, there is often no way to measure the impact of a change in one of the assumptions. Furthermore, another disadvantage of trend forecast is that it relies on past patterns of product demand to project future patterns of the product demand. This forecast of the product demand could lead to inaccurate forecasts in times of change, especially when new concepts must be included in the analysis.

End-use analysis

The disadvantage of end-use analysis is that the models assume a constant relationship between the demand and usage. But over 10 to 20 years period, new technology and the cost price of a product will undoubtedly change and the relationships