The efficacy of using judgmental versus quantitative forecasting methods in practice

Nada R. Sanders and Karl B. Manrodt

Omega, 2003, vol. 31, issue 6, 511-522

Abstract: In an era where forecasts drive entire supply chains forecasting is seen as an increasingly critical organizational capability. However, business forecasting continues to rely on judgmental methods despite large advancements in information technology and quantitative method capability, prompting calls for research to help understand the reasons behind this practice. Our study is designed to contribute to this knowledge by profiling differences between firms identified as primary users of either judgmental or quantitative forecasting methods. Relying on survey data from 240 firms we statistically analyzed differences between these categories of users based on a range of organizational and forecasting issues. Our study finds large differences in forecast error rates between the two groups, with users of quantitative methods significantly outperforming users of judgmental methods. The former are found to be equally prevalent regardless of industry, firm size, and product positioning strategy, documenting the benefits of quantitative method use in a variety of settings. By contrast, the latter are found to have significantly lower access to quantifiable data and to use information and technology to a lesser degree.

Keywords: Forecasting; Judgmental; methods; Quantitative; methods; Empirical; research (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (42)

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