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How to Make the Most of Forecasting

Forecasting is a vital tool for many businesses, but is often poorly understood by stakeholders.

"What does the random number generator say," is a joke forecasters hear too often, according to Ben Brewer, head of forecasting at Heathrow Airport. "And it's not funny."

Speaking at a recent HPC Supply Chain Innovation Lab conference in London, Brewer and other experts gave practical advice on how to make sure your business makes the most of forecasting. Here are some of the top takeaways.

Use probability forecasts where possible

Many people don’t understand how probability affects forecasting, according to Paul Goodwin, emeritus professor at the University of Bath.

“Understanding probabilities isn’t easy, but if we can help people to understand probabilities then it will make probability forecasting much more usable and available,” said Goodwin.

The forecasts most people see are ‘point forecasts’ indicating the most likely outcome, however behind that is a range of probable outcomes. This is the difference between “it will rain tomorrow” and “there is a 60-percent chance of rain tomorrow.”

Just because the most likely outcome doesn’t happen, it doesn’t necessarily make the forecast wrong. But it does make people distrust the forecast, said Goodwin. “Certainly probabilities give you a much more realistic idea of what the forecast is about.”

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"What does the random number generator say," is a joke forecasters hear too often, according to Ben Brewer, head of forecasting at Heathrow Airport. "And it's not funny."

Speaking at a recent HPC Supply Chain Innovation Lab conference in London, Brewer and other experts gave practical advice on how to make sure your business makes the most of forecasting. Here are some of the top takeaways.

Use probability forecasts where possible

Many people don’t understand how probability affects forecasting, according to Paul Goodwin, emeritus professor at the University of Bath.

“Understanding probabilities isn’t easy, but if we can help people to understand probabilities then it will make probability forecasting much more usable and available,” said Goodwin.

The forecasts most people see are ‘point forecasts’ indicating the most likely outcome, however behind that is a range of probable outcomes. This is the difference between “it will rain tomorrow” and “there is a 60-percent chance of rain tomorrow.”

Just because the most likely outcome doesn’t happen, it doesn’t necessarily make the forecast wrong. But it does make people distrust the forecast, said Goodwin. “Certainly probabilities give you a much more realistic idea of what the forecast is about.”

Read Full Article