Methods Based on Judgment

Unaided judgment   METHOD. 

It is common practice to ask experts what will happen. This is a good procedure to use when 
• experts are unbiased 
• large changes are unlikely 
• relationships are well understood by experts (e.g., demand goes up when prices go down) 
• experts possess privileged information 
• experts receive accurate and well-summarized feedback about their forecasts. 

Prediction markets METHOD.

Prediction markets, also known as betting markets, information markets, and futures markets have a long
history. 

Some commercial organisations provide internet markets and software that to allow participants  to
predict.Consultants can also set up betting markets within firms to bet on such things as the sales growth
of a new product. PREDICTIONS  can produce accurate sales forecasts when used within companies.
However, there are no empirical studies that compare forecasts from prediction markets and with those
from traditional groups or from other methods. 

Delphi  METHOD. 
The Delphi technique  helps to   capture the knowledge of diverse experts while avoiding the
disadvantages of traditional group meetings. The latter include bullying and time-wasting. 
To forecast with Delphi the administrator should recruit between five and twenty suitable experts and poll
them for their forecasts and reasons. The administrator then provides the experts with anonymous
summary statistics on the forecasts, and experts’ reasons for their forecasts. The process is repeated
until there is little change in forecasts between rounds – two or three rounds are usually sufficient. The
Delphi forecast is the median or mode of the experts’ final forecasts. 
The forecasts from Delphi groups are substantially more accurate than forecasts from unaided judgement
and traditional groups, and are somewhat more accurate than combined forecasts from unaided
judgement. 

Structured analogies METHOD.

The outcomes of similar situations from the past (analogies) may help a marketer to forecast the outcome
of a new (target) situation. For example, the introduction of new products in the  markets can provide
analogies for the outcomes of the subsequent release of similar products in other countries. 
People often use analogies to make forecasts, but they do not do so in a structured manner. For example,
they might search for an analogy that suits their prior beliefs or they might stop searching when they
identify one analogy. The structured-analogies method uses a formal process to overcome biased and
inefficient use of information from analogous situations. 
To use the structured analogies method, an administrator prepares a description of the target situation
and selects experts who have knowledge of analogous situations; preferably direct experience. The
experts identify and describe analogous situations, rate their similarity to the target situation, and match
the outcomes of their analogies with potential outcomes in the target situation. The administrator then
derives forecasts from the information the experts provided on their most similar analogies. 
Structured analogies are  more accurate than unaided judgment in forecasting decisions .
Game theory  METHOD.
is a way to obtain better forecasts in situations involving negotiations or other conflicts. 
BUT  IT  IS  NOT  A  RELIABLE   METHOD.

Judgmental Decomposition METHOD.

The basic idea behind judgemental decomposition is to divide the forecasting problem into parts that are
easier to forecast than the whole. One then forecasts the parts individually, using methods appropriate to
each part. Finally, the parts are combined to obtain a forecast. 
One approach is to break the problem down into multiplicative components. For example, to forecast
sales for a brand, one can forecast industry sales volume, market share, and selling price per unit. Then
reassemble the problem by multiplying the components together. Empirical results indicate that, in
general, forecasts from decomposition are more accurate than those from a global approach . In
particular, decomposition is more accurate where there is much uncertainty about the aggregate forecast
and where large numbers (over one million) are involved.

Expert systems METHOD.

As the name implies, expert systems are structured representations of the rules experts use to make
predictions or diagnoses. For example, ‘if local household incomes are in the bottom quartile, then do not
supply premium brands’. The forecast is implicit in the foregoing conditional action statement: i.e.,
premium brands are unlikely to make an acceptable return in the locale. Rules are often created from
protocols, whereby forecasters talk about what they are doing while making forecasts. Where empirical
estimates of relationships from structured analysis such as econometric studies are available, expert
systems should use that information. Expert opinion, conjoint analysis, and bootstrapping can also aid in
the development of expert systems. 
Expert systems forecasting involves identifying forecasting rules used by experts and rules learned from
empirical research. One should aim for simplicity and completeness in the resulting system, and the
system should explain forecasts to users. 
Developing an expert system is expensive and so the method will only be of interest in situations where
many forecasts of a similar kind are required. Expert systems are feasible where problems are sufficiently
well-structured for rules to be identified. 
Expert systems forecasts are more accurate than those from unaided judgement.  

Simulated interaction METHOD

Simulated interaction is a form of role playing for predicting decisions by people who are interacting with
others. It is especially useful when the situation involves conflict. For example, one might wish to forecast
how best to secure an exclusive distribution arrangement with a major supplier. 
To use simulated interaction, an administrator prepares a description of the target situation, describes the
main protagonists’ roles, and provides a list of possible decisions. Role players adopt a role and read
about the situation. They then improvise realistic interactions with the other role players until they reach a
decision; for example to sign a trial one-year exclusive distribution agreement. The role players’ decisions
are used to make the forecast. 
Forecasts from simulated interactions were substantially more accurate than can be obtained from
unaided judgement. Simulated interaction can also help to maintain secrecy. Information on simulated
interaction is available from conflictforecasting.com. 
Intentions and expectations surveys METHOD.
With intentions surveys, people are asked how they intend to behave in specified situations. In a similar
manner, an expectations survey asks people how they expect to behave. Expectations differ from
intentions because people realize that unintended things happen. For example, if you were asked
whether you intended to visit the dentist in the next six months you might say no. However, you realize
that a problem might arise that would necessitate such a visit, so your expectations would be that the
event had a probability greater than zero. 

Expectations and intentions can be obtained using probability scales . The scale should have descriptions
such as 0 = ‘No chance, or almost no chance (1 in 100)’ to 10 = ‘Certain, or practically certain (99 in
100)’. 
To forecast demand using a survey of potential consumers, the administrator should prepare an accurate
and comprehensive description of the product and conditions of sale. He should select a representative
sample of the population of interest and develop questions to elicit expectations from respondents. Bias in
responses should be assessed if possible and the data adjusted accordingly. The behaviour of the
population is forecast by aggregating the survey responses. 

Conjoint analysis METHOD.

By surveying consumers about their preferences for alternative product designs in a structured way, it is
possible to infer how different features will influence demand. Potential customers might be presented
with a series of perhaps 20 pairs of offerings. For example, various features of a personal digital assistant
such as price, weight, battery life, screen clarity and memory could be varied substantially such that the
features do not correlate with one another. The potential customer is thus forced to make trade-offs
among various features by choosing one of each pair of offerings in a way that is representative of how
they would choose in the marketplace. The resulting data can be analysed by regressing respondents’
choices against the product features. 
The method is based on sound principles, such as using experimental design and soliciting independent
intentions from a sample of potential customers. Unfortunately however, there do not appear to be studies
that compare conjoint-analysis forecasts with forecasts from other reasonable methods. 

Methods requiring quantitative data 

Extrapolation  METHOD 
Extrapolation methods use historical data on that which one wishes to forecast. Exponential smoothing is
the most popular and cost effective of the statistical extrapolation methods. It implements the principle
that recent data should be weighted more heavily and ‘smoothes’ out cyclical fluctuations to forecast the
trend. To use exponential smoothing to extrapolate, the administrator should first clean and
deseasonalise the data, and select  reasonable smoothing factors. The administrator then calculates an
average and trend from the data and uses these to derive a forecast 
Statistical extrapolations are cost effective when forecasts are needed for each of hundreds of inventory
items. They are also useful where forecasters are biased or ignorant of the situation . 
Allow for seasonality when using quarterly, monthly, or daily data. Most firms do this . Seasonality
adjustments led to substantial gains in accuracy in the large-scale study of time series .
Quantitative analogies METHOD.
Experts can identify situations that are analogous to a given situation. These can be used to extrapolate
the outcome of a target situation. For example, to assess the loss in sales when the patent protection for
a drug is removed, one might examine the historical pattern of sales for analogous drugs. 
To forecast using quantitative analogies, ask experts to identify situations that are analogous to the target
situation and for which data are available. If the analogous data provides information about the future of
the target situation, such as per capita ticket sales for a play that is touring from city to city, forecast by
calculating averages. If not, construct one model using target situation data and another using analogous
data. Combine the parameters of the models, and forecast with the combined model. 

Rule-based forecasting  METHODS

Rule-based forecasting (RBF) is a type of expert system that allows one to integrate managers’
knowledge about the domain with time-series data in a structured and inexpensive way. For example, in
many cases a useful guideline is that trends should be extrapolated only when they agree with managers’
prior expectations. When the causal forces are contrary to the trend in the historical series, forecast errors
tend to be large . Although such problems occur only in a small percentage of cases, their effects are
serious. 
To apply RBF, one must first identify features of the series using statistical analysis, inspection, and
domain knowledge (including causal forces). The rules are then used to adjust data, and to estimate
short- and long-range models. RBF forecasts are a blend of the short- and long-range model forecasts. 
RBF is most useful when substantive domain knowledge is available, patterns are discernable in the
series, trends are strong, and forecasts are needed for long horizons. Under such conditions, errors for
rule-based forecasts are substantially less than those for combined forecasts . In cases where the
conditions were not met, forecast accuracy is not harmed. 

Neural nets METHODS

Neural networks are computer intensive methods that use decision processes analogous to those of the
human brain. Like the brain, they have the capability of learning as patterns change and updating their
parameter estimates. However, much data is needed in order to estimate neural network models and to
reduce the risk of over-fitting the data .There is some evidence that neural network models can produce
forecasts that are more accurate than those from other methods . While this is encouraging, our current
advice is to avoid neural networks because the method ignores prior knowledge and because the results
are difficult to understand. 

Data mining METHODS

Data mining uses sophisticated statistical analyses to identify relationships. It is a popular approach. 
Data mining ignores theory and prior knowledge in a search for patterns. Despite ambitious claims and
much research effort, we are not aware of evidence that data mining techniques provide benefits for
forecasting. 

Causal models METHODS.

Causal models are based on prior knowledge and theory. Time-series regression and cross-sectional
regression are commonly used for estimating model parameters or coefficients. These models allow one
to examine the effects of marketing activity, such as a change in price, as well as key aspects of the
market, thus providing information for contingency planning. 
To develop causal models, one needs to select causal variables by using theory and prior knowledge.
The key is to identify important variables, the direction of their effects, and any constraints. One should
aim for a relatively simple model and use all available data to estimate it . Surprisingly, sophisticated
statistical procedures have not led to more accurate forecasts. In fact, crude estimates are often sufficient
to provide accurate forecasts when using cross-sectional data .

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General principles 
• Managers’ domain knowledge should be incorporated into forecasting methods. 
• When making forecasts in highly uncertain situations, be conservative. For example, the trend should be
dampened over the forecast horizon. 
• Complex methods have not proven to be more accurate than relatively simple methods. Given their
added cost and the reduced understanding among users, highly complex procedures cannot be justified. 
• When possible, forecasting methods should use data on actual behaviour, rather than judgments or
intentions, to predict behaviour. 
• Methods that integrate judgmental and statistical data and procedures (e.g., rule-based forecasting) can
improve forecast accuracy in many situations. 
• Overconfidence occurs with quantitative and judgmental methods. 
• When making forecasts in situations with high uncertainty, use more than one method and combine the
forecasts, generally using simple averages. 

Methods based on judgment 

• When using judgment, rely on structured procedures such as Delphi, simulated interaction, structured
analogies, and conjoint analysis. 
• Simulated interaction is useful to predict the decisions in conflict situations, such as in negotiations. 
• In addition to seeking good feedback, forecasters should explicitly list all the things that might be wrong
about their forecast. This will produce better calibrated prediction intervals. 

Methods based on statistical data 

• With the proliferation of data, causal models play an increasingly important role in forecasting market
size, market share, and sales. 
• Methods should be developed primarily on the basis of theory, not data. 

Finally, efforts should be made to ensure forecasts are free of political considerations in a firm. To help
with this, emphasis should be on gaining agreement about the forecasting methods. Also, for important
forecasts, decisions on their use should be made before the forecasts are provided. Scenarios are helpful
in guiding this process. 

 Many of the quantitative techniques fall into two broad categories:

1. Interval estimation
2. Hypothesis tests

Interval Estimates It is common in statistics to estimate a parameter from a sample of

data. The value of the parameter using all of the possible data, not just the sample data, is
called the population parameter or true value of the parameter. An estimate of the true
parameter value is made using the sample data. This is called a point estimate or a sample
estimate.

For example, the most commonly used measure of location is the mean. The population, or
true, mean is the sum of all the members of the given population divided by the number of
members in the population. As it is typically impractical to measure every member of the
population, a random sample is drawn from the population. The sample mean is calculated
by summing the values in the sample and dividing by the number of values in the sample.
This sample mean is then used as the point estimate of the population mean.

Interval estimates expand on point estimates by incorporating the uncertainty of the point
estimate. In the example for the mean above, different samples from the same population
will generate different values for the sample mean. An interval estimate quantifies this
uncertainty in the sample estimate by computing lower and upper values of an interval
which will, with a given level of confidence (i.e., probability), contain the population
parameter.

Hypothesis Tests Hypothesis tests also address the uncertainty of the sample estimate.
However, instead of providing an interval, a hypothesis test attempts to refute a specific
claim about a population parameter based on the sample data. For example, the hypothesis
might be one of the following:
 the population mean is equal to 10
 the population standard deviation is equal to 5
 the means from two populations are equal
 the standard deviations from 5 populations are equal

To reject a hypothesis is to conclude that it is false. However, to accept a hypothesis does

not mean that it is true, only that we do not have evidence to believe otherwise. Thus
hypothesis tests are usually stated in terms of both a condition that is doubted (null
hypothesis) and a condition that is believed (alternative hypothesis).

Managerial Inventories:

Collection of data that is used in determining the potential of present managers to progress to

positions of greater responsibility. It differs from skills inventory in the amount and details of

information maintained.

Data maintained include:


Work history

Educational background

Assessment of strengths and weaknesses

Development needs
Promotion potential

Current job performance

Field of specialization

Job preference

Geographical preference
Career goals and aspirations

Anticipated retirement date

Personal history
Replacement planning:

Focus on the identification of individual employees who will be considered promotion

candidates, along with thorough assessment of their current performance.

Replacement planning precedes succession planning.

The charts from replacement planning could be aggregated across the organization to provide a

corporate composite of talent availability.

SuccessionPlanning:
Build upon replacement plans and directly tie to leadership development. Ensures that candidates
for promotion have the specific KSAOs and general competencies required for success on the
new job.
Assesses each promotable employee for KSAO or competency gaps and where there are gaps,
creates employee training and development plans that will close those gaps.
Statistical / Quantitative: Statistical technique treats employees as numbers and forecast their
movements based on probabilities.
Vacancy Analysis:
Also known as sequencing model analyzes flows of personnel throughout the organization by
examining inputs and outputs at each hierarchical or compensation level
Equating Demand to Supply:

The first 2 phases of HRP are analytical & conceptual and the third phase is action oriented.

Only in very small firms operating in stable environment that demand equals supply. In reality it

is very rare. No action is needed to be taken in that case rather maintaining that status and

standard is sufficient. But most of the time various steps are taken to obtain a balance between

the number and kind of employees needed & the number and kind available as there remains gap

between demand and supply

Conclusion
Forecasting has an important role in successful human resource management of a company. By

predicting the number of employees to be hired and also by estimating and knowing their quality,

a company would get the best people for the right places and at the right time. This is necessary

if a company wants to compete in the global market.

Reference:

Considering these factors, that is, organization¶s environment and size, perceived uncertainty in

labor markets and economy, and competition, the Miles and Snow typology can be used to

determine appropriate forecasting techniques in an organization.

Regression analysi
Managers use forecasts for budgeting purposes. A forecast aids in determining volume of production,
inventory needs, labor hours required, cash requirements, and financing needs. A variety of forecasting
methods are available. However, consideration has to be given to cost, preparation time, accuracy, and time
period. The manager must understand clearly the assumptions on which a particular forecast method is based
to obtain maximum benefit. This post provides overview of available forecasting methods, particularly the
qualitative approach.

Management in both private and public organizations typically operates under conditions of uncertainty or risk. Probably
the most important function of business is forecasting, which is a starting point for planning and budgeting. The objective
of forecasting is to reduce risk in decision making. In business, forecasts form the basis for planning capacity, production
and inventory, manpower, sales and market share, finances and budgeting, research and development, and top
management’s strategy. Sales forecasts are especially crucial aspects of many financialmanagement activities, including
budgets, profit planning, capital expenditure analysis, and acquisition and merger analysis.

Which Area and Why Use Forecasts

Forecasts are needed for marketing, production, purchasing, manpower, andfinancial planning. Further, top management
needs forecasts for planning and implementing long-term strategic objectives and planning for capital expenditures.

More specifically, here are who and why they need to forecast:

 Marketing managers use sales forecasts to determine optimal sales force allocations, set sales goals,
and plan promotions and advertising. Market share, prices, and trends in new product development are also
required.
 Production planners need forecasts in order to: schedule production activities, order materials,
establish inventory levels and plan shipments. Other areas that need forecasts include material
requirements (purchasing and procurement), labor scheduling, equipment purchases, maintenance requirements,
and plant capacity planning. As soon as the company makes sure that it has enough capacity, the production plan
is developed. If the company does not have enough capacity, it will require planning and budgeting decisions for
capital spending for capacity expansion. On this basis, the manager must estimate the future cash inflow and
outflow. He or she must plan cash and borrowing needs for the company’s future operations. Forecasts of cash
flows and the rates of expenses and revenues are needed to maintain corporate liquidity and operating efficiency.
 In planning for capital investments, predictions about future economic activity are required so that
returns or cash inflows accruing from the investment may be estimated. Forecasts are needed for money
and credit conditions and interest rates so that the cash needs of the firm may be met at the lowest possible
cost. Forecasts also must be made for interest rates, to support the acquisition of new capital, the collection of
accounts receivable to help in planning working capital needs, and capital equipment expenditure rates to help
balance the flow of funds in the organization.
 Sound predictions of foreign exchange rates are increasingly important to managers of multinational
companies.
 Long-term forecasts are needed for the planning of changes in the company’s capital structure.
Decisions on issuing stock or debt to maintain the desired financial structure require forecasts of money and
credit conditions.
 The personnel department requires a number of forecasts in planning for human resources. Workers
must be hired, trained, and provided with benefits that are competitive with those available in the firm’s labor
market. Also, trends that affect such variables as labor turnover, retirement age, absenteeism, and tardiness
need to be forecast for planning and decision making.
 Managers of nonprofit institutions and public administrators also must make forecasts for budgeting
purposes. Hospital administrators forecast the healthcare needs of the community. In order to do this efficiently,
 a projection has to be made of: growth in absolute size of population, changes in the number of people in various
age groupings, and varying medical needs these different age groups will have.
 Universities forecast student enrollments, cost of operations, and, in many cases, the funds to be provided by
tuition and by government appropriations.
 The service sector, which today accounts for two-thirds of the U.S. gross domestic product, including banks,
insurance companies, restaurants, and cruise ships, needs various projections for its operational and long-term
strategic planning.
 The bank has to forecast: Demands of various loans and deposits Money and credit conditions so that it can
determine the cost of money it lends.

Forecasting Methods

The company may choose from a wide range of forecasting techniques. There are basically two approaches to
forecasting, qualitative and quantitative:

[1]. Qualitative approach forecasts based on judgment and opinion:

 Executive opinions
 Delphi technique
 Sales force polling
 Consumer surveys

[2]. Quantitative approach

[a]. Forecasts based on historical data

 Naive methods
 Moving average
 Exponential smoothing
 Trend analysis
 Decomposition of time series

[b]. Associative (causal) forecasts

 Simple regression
 Multiple regression
 Econometric modeling

Selection of Forecasting Method

The choice of a forecasting technique is influenced significantly by the stage of the product life cycle and
sometimes by the firm or industry for which a decision is being made. In the beginning of the product life
cycle, relatively small expenditures are made for research and market investigation.
During the first phase of product introduction, these expenditures start to increase. In the rapid growth stage, considerable
amounts of money are involved in the decisions, so a high level of accuracy is desirable. After the product has entered the
maturity stage, the decisions are more routine, involving marketing and manufacturing. These are important
considerations when determining the appropriate sales forecast technique.

After evaluating the particular stages of the product and firm and industry life cycles, a further probe is necessary. Instead
of selecting a forecasting technique by using whatever seems applicable, decision makers should determine what is
appropriate.

Some of the techniques are quite simple and rather inexpensive to develop and use. Others are extremely
complex, require significant amounts of time to develop, and may be quite expensive. Some are best suited
for short-term projections, others for intermediate- or long-term forecasts.

What technique or techniques to select depends on six criteria:

What is the cost associated with developing the forecasting model, compared with potential gains resulting from its use?
The choice is one of benefit-cost trade-off.

 How complicated are the relationships that are being forecasted?

 Is it for short-run or long-run purposes?
 How much accuracy is desired?
 Is there a minimum tolerance level of errors?
 How much data are available? Techniques vary in the amount of data they require.

 
Quantitative models work superbly as long as little or no systematic change in the environment takes place.
When patterns or relationships do change, by themselves, the objective models are of little use.

It is here where the qualitative approach, based on human judgment, is indispensable. Because judgmental
forecasting also bases forecasts on observation of existing trends, they too are subject to a number of shortcomings. The
advantage, however, is that they can identify systematic change more quickly and interpret better the effect of such
change on the future.

We discuss the qualitative forecasting method in the next section [I will take several quantitative methods, along
with their illustrations, next time].

 
Qualitative Forecasting Methods

The qualitative (or judgmental) approach can be useful in formulating short-term forecasts and can also supplement the
projections based on the use of any of the quantitative methods.

Four of the better-known qualitative forecasting methods are executive opinions, the Delphi method, sales-
force polling, and consumer surveys:

[1]. Executive Opinions

The subjective views of executives or experts from sales, production, finance, purchasing, and administration are averaged
to generate a forecast about future sales. Usually this method is used in conjunction with some quantitative method, such
as trend extrapolation. The management team modifies the resulting forecast, based on their expectations.

The advantage of this approach is; that the forecasting is done quickly and easily, without need of elaborate statistics.
Also, the jury of executive opinions may be the only means of forecasting feasible in the absence of adequate data.

The disadvantage: however, is that of “group think.” This is a set of problems inherent to those who meet as a group.
Foremost among these are high cohesiveness, strong leadership, and insulation of the group. With high cohesiveness, the
group becomes increasingly conforming through group pressure that helps stifle dissension and critical thought. Strong
leadership fosters group pressure for unanimous opinion. Insulation of the group tends to separate the group from outside
opinions, if given.

[2]. Delphi Method

This is a group technique in which a panel of experts is questioned individually about their perceptions of
future events. The experts do not meet as a group, in order to reduce the possibility that consensus is reached because
of dominant personality factors. Instead, the forecasts and accompanying arguments are summarized by an outside party
and returned to the experts along with further questions. This continues until a consensus is reached.

This type of method is useful and quite effective for long-range forecasting. The technique is done by
questionnaire format and eliminates the disadvantages of group think. There is no committee or debate. The experts are
not influenced by peer pressure to forecast a certain way, as the answer is not intended to be reached by consensus or
unanimity. Low reliability is cited as the main disadvantage of the Delphi method, as well as lack of consensus from the
returns.

[3]. Sales Force Polling

Some companies use as a forecast source salespeople who have continual contacts with customers. They believe that the
salespeople who are closest to the ultimate customers may have significant insights regarding the state of the future
market. Forecasts based on sales force polling may be averaged to develop a future forecast. Or they may be used to
modify other quantitative and/or qualitative forecasts that have been generated internally in the company.

The advantages of this forecast are:

 It is simple to use and understand.

 It uses the specialized knowledge of those closest to the action.
 It can place responsibility for attaining the forecast in the hands of those who most affect the actual results.
 The information can be broken down easily by territory, product, customer, or salesperson.

The disadvantages include: salespeople’s being overly optimistic or pessimistic regarding their predictions and
inaccuracies due to broader economic events that are largely beyond their control.
 

Consumer Surveys

Some companies conduct their own market surveys regarding specific consumer purchases. Surveys may consist of
telephone contacts, personal interviews, or questionnaires as a means of obtaining data. Extensive statistical analysis
usually is applied to survey results in order to test hypotheses regarding consumer behavior.

Common Features and Assumptions Inherent in Forecasting

As pointed out, forecasting techniques are quite different from each other. But four features and assumptions
underlie the business of forecasting. They are:

 Forecasting techniques generally assume that the same underlying causal relationship that existed in the past will
continue to prevail in the future. In other words, most of our techniques are based on historical data.
 Forecasts are rarely perfect. Therefore, for planning purposes, allowances should be made for inaccuracies. For
example, the company should always maintain a safety stock in anticipation of a sudden depletion of inventory.
 Forecast accuracy decreases as the time period covered by the forecast (i.e., the time horizon) increases.
Generally speaking, a long-term forecast tends to be more inaccurate than a short-term forecast because of the
greater uncertainty.
 Forecasts for groups of items tend to be more accurate than forecasts for individual items, because forecasting
errors among items in a group tend to cancel each other out. For example, industry forecasting is more accurate
than individual firm forecasting.

Technique

Description

1. Regression Model

Fluctuations in labor levels are projected using relevant variables, such as sales.

2. Time-Series Model

Fluctuations in labor levels are projected by isolating trend, seasonal, cyclical, and irregular effects.

3. Economic Model

Fluctuations in labor levels are projected using a specified form of the production function.

4. Linear Programming Model

Fluctuations in labor levels are analyzed using an objective function as well as organizational and environmental
constraints.
5. Markov Model

Fluctuations in labor levels are projected using historical transition rates.