Common Pitfalls in Forecasting · PDF fileCommon Pitfalls in Forecasting ... Demand...

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Common Pitfalls in Forecasting Santiago Gallino – Tuck School of Business Toni Moreno – Kellogg School of Management July 2013 – LBS – London, UK January 2017

Transcript of Common Pitfalls in Forecasting · PDF fileCommon Pitfalls in Forecasting ... Demand...

Page 1: Common Pitfalls in Forecasting · PDF fileCommon Pitfalls in Forecasting ... Demand forecasting 2. Inventory Decisions 3. ... •Historical data can have the problems we mentioned

CommonPitfallsinForecasting

SantiagoGallino– TuckSchoolofBusinessToniMoreno– KelloggSchoolofManagement

July2013– LBS– London,UKJanuary2017

Page 2: Common Pitfalls in Forecasting · PDF fileCommon Pitfalls in Forecasting ... Demand forecasting 2. Inventory Decisions 3. ... •Historical data can have the problems we mentioned

11May2017 2RetailFundamentals

LearningModules

1.Demandforecasting

2.InventoryDecisions

3.AssortmentPlanning

4.PricingDecisions

5.Theomnichannelcustomer

6.Fulfillingomnichanneldemand

7.Omnichanneljourneys

8.Supportinganomnichannel

strategy

Page 3: Common Pitfalls in Forecasting · PDF fileCommon Pitfalls in Forecasting ... Demand forecasting 2. Inventory Decisions 3. ... •Historical data can have the problems we mentioned

11May2017 3RetailFundamentals

M1.6Opening1

• ForecastBecomingTargets• Lackofunderstandingoftheuncertaintyprocess• ManagementImpactonchasingatarget• Howdoesthesethingimpacthistoricaldata• Challengesofobservationaldata

Page 4: Common Pitfalls in Forecasting · PDF fileCommon Pitfalls in Forecasting ... Demand forecasting 2. Inventory Decisions 3. ... •Historical data can have the problems we mentioned

11May2017 4RetailFundamentals

M1.6LackofUnderstanding2

• Makingaprediction• Observetherealization• Correctthepredictionbecauseof“inaccuracy”

• Itisnotinaccuracybutuncertainty• Stopandthinkifthereisanythingtocorrect• Therealizationmightverywellbewithintheexpectedoutcomeofourforecast.

Page 5: Common Pitfalls in Forecasting · PDF fileCommon Pitfalls in Forecasting ... Demand forecasting 2. Inventory Decisions 3. ... •Historical data can have the problems we mentioned

11May2017 5RetailFundamentals

M1.6ManagementImpact3

• Makingaprediction• Tracktheoutcome…• Don’tlinewhatIamseeing• Managementchasingatarget• Observetherealization• Everyoneishappybecausewemadetheforecast…• Butmaybeweshouldn’tbehappy• …• Fallshortanddon’tobservethelostsales• Madeextracostlyeffortstomakethetarget.

Page 6: Common Pitfalls in Forecasting · PDF fileCommon Pitfalls in Forecasting ... Demand forecasting 2. Inventory Decisions 3. ... •Historical data can have the problems we mentioned

11May2017 6RetailFundamentals

M1.6ObservationalData3

• Historicaldatacanhavetheproblemswementionedbefore:• Lackofunderstandingwithunnecessaryadjustments• ManagersChasingForecasts• Andthemoresubtleendogeneity…

Page 7: Common Pitfalls in Forecasting · PDF fileCommon Pitfalls in Forecasting ... Demand forecasting 2. Inventory Decisions 3. ... •Historical data can have the problems we mentioned

11May2017 7RetailFundamentals

M1.6Closing4

• RelevanceofForecast• ForecastingwithHistory• ForecastingwithoutHistory• MeasuringUncertainty• ForecastAggregation• CommonPitfalls

Page 8: Common Pitfalls in Forecasting · PDF fileCommon Pitfalls in Forecasting ... Demand forecasting 2. Inventory Decisions 3. ... •Historical data can have the problems we mentioned

11May2017 8RetailFundamentals


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