The Advantages of Probability Forecasting
Kristin 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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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.