Article ID: | iaor20011628 |
Country: | United States |
Volume: | 2 |
Issue: | 2 |
Start Page Number: | 119 |
End Page Number: | 127 |
Publication Date: | Mar 2000 |
Journal: | Manufacturing & Service Operations Management |
Authors: | Cattani Kyle, Hausman Warren |
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, update forecasts will be less accurate between 30% and 50% of the time.