Question

a) Which type of forecasting approach, qualitative or quantitative, is better? Discuss, explain and justify your affirmation. b) Discuss how you would manage a poor forecast.

Answer 1

a) Qualitative forecasting approach is used for a short term forecasting period, where adequate historical data are not available, whereas Quantitative forecasting approach is used when there is an adequate amount of historical data and forecast is for longer period.
Though quantitative techniques are better than qualitative techniques, but in some cases it cannot be used when historical data are not available. Also, quantitative techniques cannot be used in non numeric data like opinions, performance, judgements. Hence, the better option is to both use quantitative and qualitative techniques together to predict the best future.

b) A bad forecast results in mismatch of demand and supply. There can be two scenarios - Supply Increases Demand and Demand Increases Supply.
In the first case, inventory needs to be stored and disposed off at latter periods. Accordingly, the production of the product for the next period have to be adjusted. On the other hand, if there is still demand for the residual product, it can be sold off at discounted price.
In the second case, there is no inventory and the demand is high. Production of the product must be increased in the period as well as the next period. If there is a high demand of the product, it can be sold at a higher price.