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* * * * * * * * * * * * * * * * * Evaluations of Two Forecasts * Bias in Forecast * Bias in Forecast * Reasons for Bias in Forecast Linear trend or non-linear trend Seasonality External factors, such as promotion and advertisement If relevant elements are not considered in the forecast, the forecast can become biased. These elements can include: * Qualitative Methods Qualitative Methods Sales Force Composite Panel of Experts Market Research Delphi Method Application Used to generate forecasts if historical data are not available (e.g., introduction of new product) Used to modify forecasts generated by other approaches (e.g., considering information not included in quantitative methods) * Sales Force Estimate Rationale Sales force is close to customer and has good information on future demands Approach Members of sales force periodically report their estimates. These estimates are then aggregated to generate the overall forecast Main advantages Sales force knows customer well Sales territories are typically divided by district/region. Sales forecasts can be broken down correspondingly * Sales Force Estimate Bias of sales force - Might have incentives to overestimate sales or underestimate sales - Might naturally be optimistic or pessimistic Sales force does not always have all information necessary to generate forecast- Features of products launched in future- Preferences of customers in new market segments Typical application Main drawbacks Short-term and medium-term demand forecasting * Executive Opinion Rationale Upper-level management has best information on latest product developments and future product launches Approach Small group of upper-level managers collectively develop forecasts Combine knowledge and expertise from various functional areas People who have best information on future developments generate the forecasts Main advantages * Executive Opinion Expensive No individual responsibility for forecast quality Risk that few people
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