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The Advantages of Probability Forecasting

Kristin SmithKristin Smith subscriber Posts: 8 Member
edited August 2017 in Logistics Management
A point forecast is one single number that usually is incomplete. This single number is most likely the value of future demand. However, a more useful forecast is a probability forecast because it provides more than just units, and demand of dealing with volatility.
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  • charucharu subscriber Posts: 27 Bronze Level Member
    Forecasting allows you to determine your customers’ future purchasing behaviors using different types of methodologies and analysis of data. Companies who have been able to create reliable forecasting predictions have seen a reduction in inventory waste, an increase in production capabilities, and an overall cost savings throughout the supply chain.
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  • Kristin SmithKristin Smith subscriber Posts: 8 Member
    That's right charu, thinking ahead of time for your ERP gives you enough flexibility in the long-range.
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  • LifeRevivalUniverseLifeRevivalUniverse subscriber Posts: 76 Silver Level Member

    It is not just an estimate of future demand, but an estimate of the probability of each possible value of demand in the future. First, the probability of demand is estimated at 0 (zero) units, then at 1, 2 units, etc. The probability of each level of demand is estimated until the values become so negligible that they can be safely ignored.

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