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Selection of a Method of Demand Forecasting

Selection of the most suitable forecasting method for a particular situation doesn’t come easy. Which method is selected for demand forecasting is ultimately dictated by the availability of sufficient objective data (Armstrong and Green 2012). When there is no sufficient objective data, the path of methods based on judgment (qualitative method) is taken; but, if there is sufficient data, quantitative method would be selected.

However, as is the norm, quantitative data are often scanty and so one must rely on qualitative method (Armstrong and Green 2012). It is for this and other reasons below that I would prefer qualitative method to time series and causal methods which are both quantitative in nature and so require a lot of data.

Additionally, in the current global landscape, change is the only constant thing. The fact is there is now so much uncertainties in the world, businesses inclusive, that demand forecasts by causal methods can easily be rendered null and void by a single major event such as in the recent global financial crisis and currently the Ebola outbreak in West Africa – a situation impacting on demand for goods and services especially in the affected countries. In the early stages of the Ebola outbreak, the World Bank stated categorically that the epidemic would have no adverse effects on the revenues that would be generated in the West Africa sub-region; but sadly, the same organization no longer thinks so. They now say the sub-region would now lose revenues totaling in excess of US$ 32.6 million if the disease continues to spread (World Bank 2014). Any wonder, Green and Armstrong (2012) assert that demand forecasts in rapidly changing markets are usually based on judgment.

1 Conclusion

Coupled with often persistent scarce data, it is clear that one cannot be overly certain of accuracy of demand forecast in our current rapidly changing environment. Hence, there is the need to use a demand forecasting method that can generate reliable forecasts in the absence of sufficient data and even in rapidly changing environments that we as a global village do currently find ourselves; hence, my preference for the qualitative method.

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