Developing an Optimal Forecast System: The Klein Tools' Experience

DEVELOPING AN OPTIMAL FORECAST SYSTEM: THE KLEIN TOOLS’ EXPERIENCE By Guy Pearson An effective forecasting system can be created through data design … the segmentation of data is necessary to achieve the best results … trial and error in system design is crucial before settling on the right system. The goal of any forecast system design is to create a process that will produce optimal forecasts. To accomplish this, the company must have a clear understanding of the market conditions in which it operates. When forecasting for a company that serves a wide variety of markets with a vast array of products, it is necessary to gain a clear understanding of different market segments in which the company operates. Klein Tools, Inc., leading manufacturer of professional quality hand tools and occupational, protective equipment is faced with such a challenge. Prior to segmenting the data by market, one may want to consider how the forecast will be created. A common approach to forecasting is to define demand as consisting of the following four components: - Trend - Seasonality - Cyclicality - Error These components will be discussed in greater detail later in this article. With these ...