Analysis of judgmental adjustments in the presence of promotions
2013 - J.R. Trapero Arenas, D.J. Pedregal Tercero, R .Fildes, N. Kourentzes.
International journal of forecasting. 29, 234-243 (2013)
Sales forecasting is becoming increasingly complex, due to a range of factors, such as the shortening of product life cycles, increasingly 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 then add information to the forecast, such as future promotions, potentially improving the accuracy. Despite the importance of judgment and promotions, papers devoted to studying their relationship with forecasting performance are scarce. We analyze the accuracy of managerial adjustments in 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. Transfer function 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 transfer function models.