Best Practices for Demand Planning: Forecasting Models Review

The article below is a summary of one of my LinkedIn posts. If you are interested in such debates, let’s connect! I would like to thank the following people for their insightful remarks in the original discussion: Timothy Brennan, Chris Davies, Valery Manokhin, Leonardo Cabrera, Charlie Kantz, Karl-Eric Devaux, Spyros Makridakis, and Dyci Manns Sfregola.

Supply chain demand planners often ask themselves: What is the best model to forecast my demand? What are the best practices I should follow to improve my forecast?

It is impossible to give a definitive, absolute answer to those questions. There no silver bullet model that would be the best for every single company for every single product. But I will try in two articles (this is the first one, you can find the second one about forecasting process here) to review most of the existing forecasting models and then show you tips, tricks, and best practices for tweaking and selecting them. This first article will review forecasting models and see how they perform to forecast supply chain demand. Forecasting demand is nothing like forecasting electricity consumption, airplane passengers, or online connections. Supply chain demand datasets are often short — 5 years of history is already a lot — and especially volatile. It means that not all forecasting models will be…