Why Are Forecast Updates Often Disappointing?
Manufacturing & Service Operations Management · 2000 · Volume 2 · Issue 2
DOI: 10.1287/msom.2.2.119.12354
Abstract
Demand forecasts do not become consistently more accurate as they are updated. We present examples demonstrating this counterintuitive phenomenon and some theoretical results to explain its occurrence. Specifically, we analyze the effect of demand randomness on forecast-update performance. A surprising result is that under various theoretical models involving demand randomness alone, updated forecasts will be less accurate between 30% and 50% of the time.
Keywords
forecast performance, forecast updates, exponential smoothing
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