4) Explain the basic, six-step approach to help an organization perform effective forecasting.
The following basic, six-step approach helps an organization perform effective
Understand the objective of forecasting. The objective of every forecast is to support decisions
that are based on the forecast, so an important first step is to clearly identify these decisions.
Examples of such decisions include how much of a particular product to make, how much to
inventory, and how much to order. All parties affected by a supply chain decision should be
aware of the link between the decision and the forecast. Failure to make these decisions jointly
may result in either too much or too little product in various stages of the supply chain.