A field study of sales forecasting accuracy and processes

As might be expected, surveys show accuracy is the most important criterion in selecting a forecasting strategy. This may lead to the expectation that computer based software would be used to aid the forecasting effort. However, despite the wide availability of forecast software, management judgement appears to be the preferred method. This leads to the question: does management judgement provide the most accurate forecast estimates? This paper reports a field study of judgemental sales forecasting over thirteen manufacturing organizations to investigate whether these forecasts are accurate, unbiased and efficient, and whether better ex ante forecasts could have been developed using a computer based model. The study shows that the company forecasts were not uniformly more accurate than a simple, unseasonally adjusted, naïve forecast. Most of the source of error is due to both inefficiency (a serial correlation in the errors) and bias in the forecasts. These two factors seemed to mask any contribution of contextual information to accuracy. The results are also discussed in terms of forecasting objectives the organisations may have other than accuracy.