Analysis of judgmental adjustments in the presence of promotions

By | April 19, 2013

J.  R. Trapero, D. J. Pedregal, R. Fildes and  N. Kourentzes, 2013, International Journal of Forecasting, 29: 234-243.

Sales forecasting is increasingly complex due to many factors, such as product life cycles that have become shorter, more competitive markets and aggressive marketing. Often, forecasts are produced using a Forecasting Support System that integrates univariate statistical forecasts with judgment from experts in the organization. Managers add information to the forecast, like future promotions, potentially improving accuracy. Despite the importance of judgment and promotions, the literature devoted to study their relationship on forecasting performance is scarce. We analyze managerial adjustments accuracy under periods of promotions, based on weekly data from a manufacturing company. Intervention analysis is used to establish whether judgmental adjustments can be replaced by multivariate statistical models when responding to promotional information. We show that judgmental adjustments can enhance baseline forecasts during promotions, but not systematically. Statistical models based on past promotions information achieved lower overall forecasting errors. Finally, a hybrid model illustrates the fact that human experts still added value to the statistical models.

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