Demand forecasting in an enterprise – the forecasted variable selection problem
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Forecasting process efficiency depends – to a large extent – on the correct determination of the forecasted variable. Therefore, companies should use for sales forecasting, the variables that reflect actual consumer demand. However in practice, since demand is usually not directly observable, many operational measures of demand are used. In the manufacturing and retail enterprises, the most often used variables are historical orders, shipments, and billed sales volumes. The purpose of this paper is to characterise the effects of using as the predicted variable, different operational measures of consumer demand. Theoretical discussion is illustrated by an attempt to estimate errors in demand forecasts for Avon Cosmetics’ products that are related to changes in data used for forecasting.
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