Make the Baseline Forecast Your Trusted Advisor

MAKE THE BASELINE FORECAST YOUR TRUSTED ADVISOR By Larry Lapide (This is an ongoing column in The Journal, which is intended to give a brief view on a potential topic of interest to practitioners of business forecasting. Suggestions on topics that you would like to see covered should be sent via email to llapide@mit.edu. Ed) One of my consulting engagements involved developing a quantitative model for forecasting the sales of a new specialty apparel retail store, based on its potential location’s demographics. During my presentation of the model to the client executive team, the company president asked me how he should view the model’s forecast in comparison to what his management team thought sales might be. My answer to him was that he should view the model’s forecast as just another input on a store’s potential and that he should also seriously consider the inputs from his management team. However, I pointed out to him that all inputs are not equal! The most important thing for him to remember when weighing the model’s input versus that from his executives was that a quantitative model has no bias. A model basically weighs all factors in a dispassionate way, ...