How much will the economy grow over the next year? Where is the stock market
headed? What about interest rates? How will consumer tastes be changing? What
will be the hot new products?
Forecasters have answers to all these questions. Unfortunately, these answers will
more than likely be wrong. Nobody can accurately predict the future every time.
Nevertheless, the future success of any business depends heavily on how savvy its
management is in spotting trends and developing appropriate strategies. The leaders of
the best companies often seem to have a sixth sense for when to change direction to stay
a step ahead of the competition. These companies seldom get into trouble by badly misestimating
what the demand will be for their products. Many other companies do. The
ability to forecast well makes the difference.
The preceding chapter has presented a considerable number of models for the management
of inventories. All these models are based on a forecast of future demand for a
product, or at least a probability distribution for that demand. Therefore, the missing ingredient
for successfully implementing these inventory models is an approach for forecasting
demand.
